Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

ISLE OF WIGHT COUNTY COUNCIL BILL

Bill to be read the Third time upon Tuesday next at Seven o'clock.

GREATER LONDON COUNCIL (GENERAL POWERS) (No. 2) BILL (By Order)

Order read for consideration of Lords Amendments.

Lords Amendments to be considered upon Tuesday next at Seven o'clock.

GREATER LONDON COUNCIL (MONEY) BILL (By Order)

Order for Second Reading read.

Bill to be read a Second time upon Tuesday next at Seven o'clock.

DUNBARTON COUNTY COUNCIL ORDER CONFIRMATION BILL

Read the Third time and passed.

Oral Answers to Questions — HOME DEPARTMENT

Cinema Advertising

Mr. Lane: asked the Secretary of State for the Home Department what response he has received to his circular to local authorities designed to control obscene or indecent advertising of films.

The Secretary of State for the Home Department (Mr. Reginald Maudling): I would refer my hon. Friend to the reply given to a Question by my hon. Friend the Member for Croydon, South (Sir R. Thompson) on 13th May.—[Vol. 817, c. 606.]

Mr. Lane: I am grateful for that reply. Does my right hon. Friend accept that many people inside and outside this House who are neither prudes nor censorship lobbyists think that obscene and indecent displays in public places are becoming a serious menace? Will my right hon. Friend assure us that curbing these displays will be a top priority of the Home Office, in co-operation with local authorities, and that, if necessary, changes in the law will be introduced?

Mr. Maudling: I accept that there is concern about this practice. That is why I issued my circular. However, dealing with obscene or indecent advertising is for the local authorities, and they have the legal power to do it. They are not answerable to me. It is their responsibility. The purpose of my circular was to make clear to the public and to local authorities the powers that local authorities have.

Mr. Kaufman: Is the right hon. Gentleman aware that constituents of mine in Manchester are concerned about the subjection of their children to obscene publicity of this kind and to obscene displays in shop windows? Does the right hon. Gentleman agree that the protection of children must be the main consideration in any action that he takes?

Mr. Maudling: I accept that there is a great deal of concern of that kind. But the Question deals with the advertising of films. As I said, this is a matter for the


local authorities. Perhaps the hon. Gentleman and his constituents ought to make representations to the local authority.

Mr. Michael McNair-Wilson: In view of the permissive nature of my right hon. Friend's circular, will he say that he will not delay ensuring that local authorities act on it, and that he will back up his circular with stronger implications to local authorities if there appears to be any unwillingness on their part to act?

Mr. Maudling: It would be difficult for me to do that. Where local authorities have legal powers, it is not for me to tell them how to carry them out. That is for the people who elect them.

Non-Custodial Penalties (Community Projects)

Mr. Meacher: asked the Secretary of State for the Home Department what progress he has made in the development of community project participation as a type of non-custodial penalty.

The Under-Secretary of State for the Home Department (Mr. Mark Carlisle): At the beginning of the year my right hon. Friend set up a working group to consider the practical issues raised by the proposal for community service by offenders and what form of arrangements seems best suited to give effect to it.

Mr. Meacher: Does the hon. and learned Gentleman acknowledge that community service is a far more satisfactory alternative than sheer custodiality for very many offenders? Has the hon. and learned Gentleman any estimate of the proportion of first offenders currently in prison who could be more satisfactorily dealt with in this way, and will he say for how many of them such schemes are planned for operation in the next five years?

Mr. Carlisle: I cannot at the moment give an estimate of the kind for which the hon. Gentleman asks. The idea of community service in principle is extremely attractive. That is why we have set up a working party to look at the practical difficulties involved.

Fire Service

Mr. Sillars: asked the Secretary of State for the Home Department what

initiatives the Government will now be taking to help improve morale in the Fire Service arising from their discussions with the fire authorities.

Mr. Maudling: If I am right in thinking that the hon. Member has in mind the recommendations in the Holroyd Report about communications and relationships within the service and local consultative machinery, the answer is that I have not yet had the views of all the organisations concerned.

Mr. Sillars: Is the right hon. Gentleman aware of the direct relationship between wages and morale in the Fire Service? Is he aware also that firemen are decidedly apprehensive about the future purchasing power of the Fire Service wages if we enter the E.E.C. and become involved in the higher food prices which are inherent in the acceptance of the common agricultural policy? Can the right hon. Gentleman give a firm assurance that, if prices increase because of Britain's entry into Europe, Fire Service wages will also be increased?

Mr. Maudling: The hon. Gentleman is trying to trap me into going a little beyond the scope of the Question. There has been a recent pay settlement, and we have established the Cunningham Committee which is looking at the relative position of firemen. I think that we must await the report of that body.

Mr. Merlyn Rees: As the Holroyd Report was received about a year ago, is it not taking a long time to get discussions completed?

Mr. Maudling: It takes more than one to make a discussion. I am still awaiting the views of people for whose comments I have asked.

Race Relations Act (Joint Stock Banks)

Sir A. Meyer: asked the Secretary of state for the Home Department whether he is satisfied with the operation of Section 3 of the Race Relations Act, 1968, as it relates to the joint stock banks; and if he will make a statement.

Mr. Maudling: I have no reason for supposing that this Section has given rise to difficulties, but if my hon. Friend has information to support that there is cause


for disquiet, perhaps he would let me know.

Sir. A. Meyer: Will my right hon. Friend tell us whether he has ever had a cheque cashed by a coloured cashier? Is he aware that yesterday I visited 12 banks and that in only one was a coloured face to be seen, and that was not in Barclay's D.C.O.? Will he encourage the other banks to follow the example of the National Westminster by issuing clear guidance for their staff that the Race Relations Act is to be fulfilled not only to the letter but in spirit?

Mr. Maudling: The need to fulfil the Act to the letter and in spirit is recognised by the banks. I am not aware of examples where they are not doing so. A number of coloured staff are employed in branches in London. I cannot recall seeing one, but I think that I have. I think that the banks are doing a good job in this respect. I know that they intend to do so. I should be glad to consider any examples falling short of that.

Dog Breeding (Premises)

Mr. Hicks: asked the Secretary of State for the Home Department whether he will consider introducing legislation governing the standards and conditions of premises used for dog breeding.

Mr. Carlisle: My right hon. Friend is not persuaded that the introduction of legislation for this purpose is necessary.

Mr. Hicks: Is my hon. and learned Friend aware of the anxiety about this problem felt nationally, and particularly in Cornwall, from both the public health and the animal welfare aspect? Does he agree that it is both logical and desirable to have legislation parallel to that for dog boarding kennels?

Mr. Carlisle: I am aware of the publicity in the Press on this matter concerning a kennel in Cornwall. Any case of cruelty or neglect in breeding establishments or elsewhere is covered by the Protection of Animals Act, 1911.

Mr. William Price: Is the right hon. and learned Gentleman aware of the growing concern about the care and treatment of animals generally and the astonishment at the leniency with which the most wicked crimes are often treated

by the courts? Is it not time for a Home Office inquiry into all animal welfare?

Mr. Carlisle: It would be improper for me to comment on the individual sentence in any individual case, but the home Office is responsible for maximum penalties which are available to the courts. I did not know that there was any problem, but I will willingly look into it.

Fire Damage

Mr. Tilney: asked the Secretary of State for the Home Department what proposals he has designed to lessen fire damage to property in Great Britain in view of the damage to the economy resulting from the present level of destruction.

Mr. Maudling: Protection of property against fire is primarily a matter for owners and their insurers. Help from fire authorities is freely available, and legislation directed to the protection of life contributes to the protection of property. The Home Office will continue to encourage and co-ordinate publicity, covering all aspects of fire safety, whether undertaken by central and local government insurance interests or other bodies.

Mr. Tilney: Is my right hon. Friend aware that in the first three months of this year fire losses were 25 per cent. greater than last year? Is this not a burden on our economy? Will he consult our right hon. Friend the Chancellor of the Exchequer and point out that it would be very helpful if 100 per cent. of the cost of specific fire-fighting equipment could be written off by companies as they so wished, and not just in the development areas?

Mr. Maudling: I think that I am right in saying that provision is included in the Budget which will help in this matter when it becomes effective. Apart from that, we are preparing a voluntary code of practice for these matters. However, primarily people must be responsible for taking their own precautions, and the insurance companies are normally pretty hot on making sure that they do so.

Forensic Science Laboratory (Peterlee)

Mr. Dormand: asked the Secretary of State for the Home Department whether he will establish the Home Office forensic laboratories in Peterlee.

Mr. Carlisle: Peterlee is one of a number of possible sites under consideration for a new forensic science laboratory to serve the North-East.

Mr. Dormand: I thank the hon. and learned Gentleman for that encouraging reply. Is he aware of the unique advantage enjoyed by Peterlee New Town in having a computer-based science centre, a project approved by the last Government and confirmed by this Government? Is he also aware that the project is in a state of development where Government assistance, in the shape of the transference of Government Departments, is now essential if it is to continue to develop?

Mr. Carlisle: I am aware that the Peterlee Development Corporation is seeking to build up Peterlee as a scientific centre, and the Government support it in that endeavour. This is one reason for our looking at Peterlee as a possible site for the forensic science laboratory.

Young Children (Effects of Prison Life)

8. Miss Lestor: asked the Secretary of State for the Home Department what studies have been carried out to ascertain the effects of prison life upon young children.

Mr. Carlisle: The Home Office Research Unit has made a study of the immediate effect of the imprisonment of women upon their children left in the community. The number of children brought into prison is so small, and the period for which they remain is so short, that a study of the effect which the experience has upon them would be a very long-term project.

Miss Lestor: I accept that the intention behind the proposal for keeping young children in prison with their mothers for a longer period, if necessary, is entirely compassionate. Does the hon. and learned Gentleman agree that we are working in the dark concerning the long-term effects upon young children? Will he, even at this late stage in the proposal for the new Holloway, consider alternative methods of dealing with women offenders with pre-school children?

Mr. Carlisle: I accept that we have no research evidence to show the effect

on a young child of spending a part of his time in prison with his mother. All I should say—I have been over this ground many times before—is that there will always be a proportion of women offenders for whom prison is probably the only possible punishment. In those circumstances, the Government think it right to press ahead with the rebuilding of Holloway, as was proposed by the previous Administration.

Probation Officers (Pay)

Mr. Fowler: asked the Secretary of State for the Home Department whether he will now make a statement on an increase in salaries for probation officers.

Mr. Maudling: The employers' side of the Joint Negotiating Committee for the Probation Service, with the agreement of the Government, has offered increased salaries for main grade officers with effect for one year from 1st April, 1971. There would be a general increase in the basic scale ranging from 8 to 8½ per cent. and a special annual allowance of £70 payable beyond the fourth point of that scale. Additionally, a long-service increment of £72 would be payable after 10 years on the maximum of the scale, making £2,150 a year in all. The employers were also prepared to offer a common starting salary of £1,500 for professionally trained entrants, although this would involve smaller percentage increases at certain points on the basic scale. I understand that the staff side representatives would have been prepared to conclude an agreement on this basis at a future meeting of the Joint Negotiating Committee. But the recent Annual Conference of the National Association of Probation Officers passed a vote of no confidence calling upon them to resign.

Mr. Fowler: I thank my right hon. Friend for that reply. Does he agree that a strong probation service is a vital factor in the Government's plans to tackle crime? Many probation officers regard this offer as sadly inadequate. In view of the importance of a strong probation service, will my right hon. Friend consider setting up an independent inquiry into the conditions and pay of the probation service?

Mr. Maudling: This offer was designed with that point very much in view—namely, the need to make a special


increase in the strength of the probation service. I believe that, if accepted, it would have had that effect. It is, in a sense, analogous with the settlement with the police which included a two-part settlement: a basic increase equivalent to the general increase in wages and salaries and a subsequential increase to deal with special problems, particularly wastage.

Mr. Crawshaw: Is the right hon. Gentleman aware that I believe that he is trying to help probation officers? But surely there must be something wrong when people dedicated to the probation service know that, by moving to the local authority and doing a similar job, they can get a tremendous increase in salary? Is not the right hon. Gentleman putting a premium on the loyalty of these people? Will he take the matter back to the Cabinet and tell his colleagues that if he does not do something about it, far from an increase in the numbers of probation officers, there will be fewer at the end of the year?

Mr. Maudling: I do not believe that that will happen. Recruitment has been going well recently. As I said, staff side representatives would have been prepared to conclude an agreement on this basis.

Mr. Deedes: Is my right hon. Friend aware that while, on the face of it, this has been a reasonable offer, if he wants to get the strength of the probation service up from about 3,200 to nearer 5,000, in view of its manifold responsibilities and to meet the claims of Seebohm, he will have to take a wider look at the matter, possibly on the lines recommended by my hon. Friend the Member for Nottingham, South (Mr. Fowler)?

Mr. Maudling: I should not have recommended the settlement unless I believed that it would carry out the policy which the Government announced, and to which we are committed, of expanding the size and strength of the service.

Mr. Callaghan: Is it much good the Home Secretary's calling in aid the negotiating committee if it has been sacked by its annual conference? Does not that reveal a depth of feeling perhaps unknown to the right hon. Gentleman when he made the original proposals? Will not he

respond to the expression of opinion on both sides of the House that he should take the matter into consideration again himself? Does he propose to impose the settlement now, or are there any further steps he intends to take to try to get some acceptance among the staff?

Mr. Maudling: We must for the moment await what the staff side intends to do. There was the negotiation about which I have spoken, and the staff side representatives were prepared to conclude an agreement. I do not yet know what it intends to do at the next negotiating committee.

Mr. Callaghan: Must the Home Secretary wait until he sees what the staff side will do? Is not the primary responsibility his? As he is obviously aware of the dissatisfaction which the staff side feels, because it has sacked its negotiating committee, will he say whether he is ready, in advance of the proposals from the staff side, to consider alternative and better arrangements?

Mr. Maudling: The responsibility for making offers rests with the employers' side. I agree with the offer which it put forward and think that it is right in the circumstances. I understood that it was accepted by the representatives. I am sorry that that has led to the present situation. It is right to wait and see the form taken by the new situation.

Bail

Mr. Clinton Davis: asked the Secretary of State for the Home Department if he is satisfied that magistrates' courts are complying fully with the provisions of the Criminal Justice Act, 1967, relating to bail; and if he will make a statement.

Mr. Carlisle: This is a matter on which my right hon. Friend is consulting the organisations concerned with magistrates' courts.

Mr. Davis: Is the hon. and learned Gentleman aware that Section 18(7) of the Criminal Justice Act requires that where bail is refused the court should inform unrepresented defendants of their right to appeal to a judge in chambers, and that by the same Section the court must give written notice of the grounds of refusal to an unrepresented defendant? In view of the report which has recently been published by Mr. Zander, there is


ground for believing that courts are not complying with those requirements. Will the Under-Secretary look into the question very carefully, as a matter of great urgency, bearing in mind the way in which these factors impinge upon our civil liberties?

Mr. Carlisle: I am aware of the provisions of Section 18 of the 1967 Act, which the hon. Gentleman correctly stated. It is as a result of the evidence brought forward by Mr. Zander that my right hon. Friend is consulting the organisations concerned to see whether those provisions are being properly implemented.

Mr. Grieve: Will my right hon. Friend the Home Secretary bear in mind when considering the matter that in the past two years large numbers of cases have come before the courts of persons who have committed offences whilst on bail? When making his representations to the magistrates, will he bear in mind the considerable difficulties they have in deciding whether to grant bail in particular circumstances?

Mr. Carlisle: The decision whether to grant bail in particular circumstances must be a matter for the individual court. The matter on which I said that my right hon. Friend was consulting the organisations concerned with the magistrates' courts was the implementation of subsections (7) and (8) Section 18 of the 1967 Act.

Mr. Elystan Morgan: What percentage of those persons not given bail are afterwards acquitted or, of those found guilty, are not sentenced to imprisonment?

Mr. Carlisle: I cannot without notice give the exact proportion. I know that the figure of those not eventually sent to prison is substantial, but there are many reasons why they may have been refused bail in the first place. We are looking into the whole question of bail, and are in particular considering the possibility of a bail hostel.

Prisoners on Parole

Mr. Hiley: asked the Secretary of State for the Home Department if, when he is giving consideration to releasing prisoners on parole who have been convicted of robbery or robbery with violence

involving large sums of money, he will regard the amount of restitution to be made by the prisoners as a predominant factor in deciding whether or not to grant parole.

Mr. Maudling: This is a factor taken into account by both the Parole Board and myself. Its importance has to be assessed in the circumstances of each case.

Mr. Hiley: Does my right hon. Friend agree that such crimes are very carefully planned, even on a scientific basis, and that if those who have been sentenced have to take probably only a third of their punishment in prison they may regard that as a good incentive for further crime?

Mr. Maudling: Questions of granting parole are extremely difficult. In the short time in which I have been at the Home Office, nothing has given me more concern than individual cases of granting parole. Therefore, I cannot agree that restitution should be a predominant factor, though I agree that it is one of the factors which should always be taken into account.

Mr. Callaghan: Is there any prospect of the engaging habit spreading by which a prisoner who has been convicted of robbery of a large sum of money has it sent to him in prison so that it may be intercepted by the authorities?

Mr. Maudling: I have not heard of that. I will look into it.

Remand Centres (Conditions)

Mr. Hugh Jenkins: asked the Secretary of State for the Home Department whether he has received the memorandum from the Howard League for Penal Reform on conditions at Ashford and other remand centres; and what action he is taking to improve the situation.

Mr. Carlisle: The answer to the first part of the Question is Yes, Sir. The answer to the second part is that, as regards Ashford, overcrowding has been relieved by the use of accommodation at Latchmere House, and as regards the general issue, administrative measures are in hand to reduce the number of persons remanded in custody and the length of time for which they are so detained.

Mr. Jenkins: Is it the case that the number of prisoners remanded in custody and the length of time for which they are detained have been increasing? What measures does the hon. and learned Gentleman propose to reduce the numbers of people detained on remand and the length of time they are detained, and to improve the accommodation supplied for them?

Mr. Carlisle: There is no doubt that there is substantial overcrowding in remand centres. I accept that that is part of the general picture of prison overcrowding. We have sent a circular to all clerks to the court suggesting arrangements whereby, when a person is remanded for reports to be made, the prison can inform the court immediately they have been made, so that he can perhaps be brought back at an earlier date than the date to which he was remanded, or he can be remanded in custody for reports with a clause saying that he can receive bail the moment the reports have been completed. As I said just now, we are also looking at the question of a bail hostel.

Mr. Thomas Cox: Does the hon. and learned Gentleman agree that much overcrowding in remand centres is caused by the long delay during which young people are kept in custody? I know that at Latchmere House one youngster has been kept in custody for five months awaiting trial. This adds to the problem of overcrowding.

Mr. Carlisle: The delay in the hearing of criminal trials is the major cause of the length of time people spend in custody awaiting trial. It is hoped that the Courts Act, which was recently passed, will help to improve this situation. My noble Friend the Lord Chancellor has certain building programmes under way to provide more courts in the London area.

Indictable Crime (Brixton)

Mr. Lipton: asked the Secretary of State for the Home Department by what percentage indictable crime in the area covered by the Brixton Police Station has risen or fallen in 1970 compared with 1969; and how this compares with the Metropolitan Police area as a whole.

Mr. Carlisle: Compared with 1969, the number of indictable offences known to

the police in 1970 for the area covered by the Brixton police station decreased by 8·1 per cent. The corresponding figure for the Metropolitan Police District as a whole was a decrease of 0·1 per cent.

Mr. Lipton: Does not that encouraging downward trend, which follows a 5 per cent. decrease last year, show that Brixton is a much more law-abiding place than many people will admit? Does not it also show what can be achieved by good community relations in which all sections of the public take an active part?

Mr. Carlisle: Like the hon. Gentleman, I welcome the reduction of crime in Brixton, and I concede that, on the face of it, it appears to show what he suggests. The police in the area, as in the rest of the country, are doing excellent work in their fight against crime. It is encouraging to see figures of reducing crime such as we have seen in Brixton.

Caravans (Fire Precautions)

Mrs. Sally Oppenheim: asked the Secretary of State for the Home Department if he will seek to make it statutorily compulsory for caravans to be fitted with two gallon water carbon dioxide fire extinguishers.

Mr. Carlisle: My right hon. Friend does not think that this would be justifiable.

Mrs. Oppenheim: Is my hon. and learned Friend aware that a considerable body of opinion feels that it is not only justifiable but essential, because caravans are notoriously bad risks, and while it takes only five minutes for a caravan fire to become uncontrollable, the average time taken throughout the country for fire brigades to reach caravan sites is 10 minutes? Therefore, prompt and effective action is vital, especially as the site fire-fighting facilities recommended in the model standards are neither adequate nor mandatory?

Mr. Carlisle: I am aware of the facts my hon. Friend gives. It is important that there should be adequate fire-fighting facilities on the sites. We think that that is a better way to tackle the problem than statutorily to require the individual caravan to have a fire-fighting appliance. I should add that the provision of adequate fire-fighting facilities on site is


one of the conditions attached to licences under the Caravan Sites and Control of Development Act, 1960.

Illegal Immigrants

Mr. Grieve: asked the Secretary of State for the Home Department whether he is aware that the United Kingdom Immigrants Advisory Service have passed a resolution to give confidential help to immigrants who entered or remained in the United Kingdom illegally and wish to regularise their position; and what action he proposes to take in the matter.

Mr. Maudling: People whose presence here is illegal because, having been admitted lawfully, they overstay their leave have rights of appeal under the Immigration Appeals Act, 1969 and it is a legitimate function of U.K.I.A.S. to assist them. This is not the case where the initial entry itself was unlawful. I am ensuring that this distinction is clear to U.K.I.A.S., in relation to the use of public funds.

Mr. Grieve: I thank my right hon. Friend for his reply. Will he make it plain to the Immigrants Advisory Service that were it to give confidential advice to those whose initial entry into the country was illegal, it might put itself in a position of being accessory to the offence of being an illegal immigrant?

Mr. Maudling: I am in correspondence with the Chairman on this matter and I do not anticipate any difficulty in reaching agreement.

Firearms Act, 1968 (Shotguns)

Mr. Farr: asked the Secretary of State for the Home Department if he is satisfied with the operation of the Firearms Act, 1968, especially in relation to the penalties being imposed for the carrying of a loaded shotgun in a public place and the possession of a shotgun without a certificate; and if he will make a statement.

Mr. Maudling: The operation of the Act is under review; but, subject to the limits prescribed by law, it is for the court to decide what penalty to impose in a particular case.

Mr. Farr: Is my right hon. Friend aware that although penalties under the Act are extreme and in some cases can result in a term of imprisonment of up to five years and a fine, quite often courts impose only a derisory fine of, say £2 or £3? If the Act is to have a chance to work, does he not agree that a word of advice from him to the courts on the implementation of these penalties would be a good thing?

Mr. Maudling: The circumstances in which somebody can possess a shotgun without a certificate can vary enormously. Therefore, it is inevitable that the sentences imposed will vary a great deal. It is for a court to decide in a particular case, and in the light of the circumstances, the appropriate penalty, but I have no doubt that note will be taken of what my hon. Friend said.

Mr. Molloy: Is the Home Secretary aware that the point made by the hon. Member for Harborough (Mr. Farr) is causing grave concern since it is felt that the Act is not working because the proper penalties are not being enforced? Would he be prepared to look at the facts to see how easy it is to come by a shotgun or any other offensive weapon? Is there not need for a review to examine whether there should be much more stringent laws relating to a person being able to get hold of a weapon and carrying it about in order to threaten civilians?

Mr. Maudling: It is for Parliament to prescribe the maximum penalties and for the court to decide the particular penalty. We should not take upon ourselves the decision as to what sentence is to be imposed in a paricular case. The operation of the Act is at present under review, and I will ensure that what has been said today will be fully taken into account in the course of that review.

Dossiers of Personal Information

Mr. Leslie Huckfield: asked the Secretary of State for the Home Department what research is being conducted by his Department into the compilation of dossiers of personal information to further the apprehension of criminals.

Mr. Maudling: The police national computer project will provide an index to the criminal names files held at criminal record offices. Research is being


undertaken to see whether the content of those files—for example, details of convictions—and other police information can usefully be put on a computer. No new personal dossiers are being compiled or are contemplated.

Mr. Huckfield: I am grateful to the right hon. Gentleman for giving me that detailed information. Could he tell the House whether this will be one of the matters to be considered by the inquiry which has been set up to look into the allegation of leaks of confidential information from Government Departments?

Mr. Maudling: Yes. Once the information is on the computer it will be much easier to guarantee the security of the information.

Immigration Bill (Membership of E.E.C.)

Mr. Bidwell: asked the Secretary of State for the Home Department what changes he proposes to seek to make in the Immigration Bill as a result of the most recent Ministerial meeting in Brussels in connection with the United Kingdom's application to join the European Economic Community.

Mr. Maudling: None, Sir.

Mr. Bidwell: Is it not odd that, as well as the muddle over patriality and non-patriality in the present Immigration Bill, right in the middle of negotiations on the Common Market, which must fundamentally affect Britain's immigration laws, the Government have nothing to say about this matter?

Mr. Maudling: If it were necessary to say something, it would be said, but these negotiations are still in process. My information is that if we were to accept the whole provisions of the Treaty of Rome unamended in this regard, it would not necessarily cause any amendment of the Immigration Bill.

Mr. Callaghan: Is the right hon. Gentleman aware that his last statement is the subject of considerable argument and that there is evidence that if we were to accept the full provisions of the Treaty of Rome, the regulations and the directives, particularly those affecting immigrant families, it would be necessary

to amend the Bill? Could we have an authoritative statement from the Home Secretary setting out in which circumstances he believes amendment of the present Bill to be unnecessary?

Mr. Maudling: As I said, the provisions of the Treaty of Rome, which I have studied, say nothing that will mean any amendment of the Bill.

Mr. Callaghan: The Home Secretary is a man we respect, but he cannot ride off a simple statement of that sort. Is he not aware that there is considerable argument about this matter and about the whole basis of the Act, which rests on the exclusion of immigrant families in certain circumstances, and the fact that they may not come here except for limited periods is undermined by the provisions of the Treaty of Rome? Are we not entitled to a better explanation from the right hon. Gentleman of how he reconciles these differences?

Mr. Maudling: I can do no more than give the House my own considered view, having considered the matter carefully, that the obligations of the Treaty would not involve amendment of the Bill.

Mr. St. John-Stevas: Is my right hon. Friend not right in maintaining that position since, apart from the response of the member countries of the Community as it is now, or as it will be when enlarged, the control of immigration into each country is entirely a matter for domestic legislation?

Mr. Maudling: I do not think that I shall argue detailed points in question and answer—we have plenty of scope for that elsewhere. I repeat that, having gone into the point, the information I have given to the House this afternoon is to the best of my knowledge correct.

Mr. Callaghan: How does the Home Secretary reconcile his last statement with Article 1 of the Treaty which provides that any national of a member State, irrespective of his place of permanent residence, shall be entitled to take up and carry on a wage-paid occupation in the territory of any member State?

Mr. Maudling: It is possible to carry that out within the terms of the Bill.

Mr. Callaghan: It is not.

Shops Act

Mr. Gurden: asked the Secretary of State for the Home Department what proposals he now has to amend the Shops Act.

Mr. Carlisle: None at present, Sir.

Mr. Gurden: Is my hon. and learned Friend aware that as the law stands this is a nonsense and that we urgently need a new shops Bill? Could he say when there will be a Bill before the House on this matter?

Mr. Carlisle: The Government will follow the progress made by private Members' legislation on this subject. While the Government are generally in favour of flexibility on shops' hours, they recognise that proposals for change arouse controversy and concern.

Stephen McCarthy

Mr. Willey: asked the Secretary of State for the Home Department what investigation is being made about the death of Stephen McCarthy, an escapee from a borstal institution.

Mr. Maudling: Allegations that the police assaulted Stephen McCarthy have been investigated but have not been substantiated. I have inquired into the medical treatment which he received at Wormwood Scrubs and at Dover borstal and I am satisfied that he received all reasonable attention and care.

Mr. Willey: I thank the right hon. Gentleman for that reply. Is he aware that in cases such as this it would be far better to have an independent open inquiry?

Mr. Maudling: This case was referred to the Director of Public Prosecutions, who is a wholly independent person.

Mr. John D. Grant: Is the Home Secretary aware that the case has now been referred to the Parliamentary Commissioner for investigation of further aspects? Is he also aware that tonight I am meeting the Southwark coroner to discuss another aspect of the case and that if my hon. Friend had consulted me about this matter it might have saved a little time?

James Hanratty (Conviction for Murder)

Mr. Loughlin: asked the Secretary of State for the Home Department if he will institute a public inquiry into the case of James Hanratty, who was convicted and hanged for the alleged murder of Michael Gregston on 22nd August, 1961.

Mr. Whitehead: asked the Secretary of State for the Home Department if he will now order a public inquiry into the circumstances of the trial and conviction of James Hanratty for murder.

Mr. Maudling: I cannot at present add to the reply which I gave to a Question on 6th May by the hon. Member for Derby, North (Mr. Whitehead).—[Vol. 816, c. 424.]

Mr. Loughlin: Is not the right hon. Gentleman aware that there is considerable disquiet, both inside and outside the House, about a possible miscarriage of justice in this case? Does he not think that, in the light of the evidence advanced in recent weeks, there is such an element of doubt about the guilt or otherwise of James Hanratty as to justify a public inquiry? Will he say when he is likely to make up his mind whether a public inquiry will take place?

Mr. Maudling: Certainly. "As soon as possible" is the answer. This is a matter that gives rise to considerable public concern and that is why I want to get the full facts before coming to a conclusion. This is a complicated matter. I am having a full analysis made of the latest publication on this subject and I shall then have to determine whether it brings out any new factors not previously known. I cannot make a decision on that until I have been fully advised—[An HON. MEMBER: "By whom?"] By my advisers, of course. There are voluminous documents which I shall have to study, and, until I have examined all the advice I cannot reach a conclusion, but I will do so as soon as I can.

Mr. Whitehead: Is the Home Secretary not aware that a full investigation is wanted by many hon. Members on both sides of the House, so as to get at the facts by power of subpoena? Those facts will not be established by study of the


documents in the possession of the Home Office, nor by the statement and allegations of conspiracy, and confession of Mr. Peter Alphon. What is necessary is a public inquiry, with power of subpoena.

Mr. Maudling: This has been considered many times in the past. My duty is to decide whether anything new has emerged which calls for a new inquiry. I cannot decide that until a full analysis is made of the book, which has several hundred pages, and until substantial research has been done. I cannot come to a conclusion until I have the full facts.

Dame Irene Ward: The mother of the boy concerned is a constituent of mine in that she resides in my constituency. Will the Home Secretary give us an analysis of the people who have asked him for an inquiry? It is important for all of us in the North of England to know the facts. My right hon. Friend has had comprehensive representations from a large number of people for an inquiry, and we should welcome knowledge on the subject.

Mr. Maudling: As I said, this case has been considered by my predecessors. I approach it afresh. I am determined to get possession of all the available facts and come to a conclusion on that basis.

Mr. Callaghan: I am sure that the Home Secretary will approach this matter with a great sense of responsibility, as Home Secretaries always do. In the light of what has happened, I think that he should take as much time as he needs to consider it, but if he reaches a conclusion that there should be a fresh public inquiry, I, speaking from my past study of the case, should not want to dissent from that merely because a different conclusion was reached earlier.

Mr. Maudling: I am grateful to the right hon. Gentleman for what he says.

Mr. Loughlin: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest possible opportunity.

Licensing Laws (Review Committee)

23. Miss Joan Hall: asked the Secretary of State for the Home Department in considering appointments to the com-

mittee to review the licensing laws, what inquiries he made as to the qualifications of potential members for assessing the views of regular customers at their local pub.

Mr. Maudling: I had this consideration much in mind in issuing invitations.

Miss Hall: Will my right hon. Friend tell us whether these people do know what goes on in the ordinary good old British pub and not just in the flashy joints? It is a big mistake that there should be no representative from the licensing trade.

Mr. Maudling: I considered this, and I thought it wrong to have representation of any particular interest, be it the brewing or the drinking interest.

Mr. Lipton: Does not the Home Secretary know that the composition of this committee is regarded as a joke by everyone in the licensing trade? What are the qualifications of this variegated assortment of people who know nothing at all about the licensing laws?

Mr. Maudling: I thought they were rather a good selection. Certainly many of them, like the Home Secretary, have some knowledge of the effects of the licensing laws. The expert and interested bodies in the licensing trade will have a full and complete opportunity to put their views before the Committee.

Mr. St. John-Stevas: Will the Home Secretary assure the House that the interests of the licensees, who form one of the most long-suffering sections of the public, will be fully protected?

Mr. Maudling: Yes, Sir, I am sure they will be. The whole point is that they should have a full opportunity, as they will have, of stating their views in detail to the Committee.

Traffic Problems (North Ealing)

Mr. Molloy: asked the Secretary of State for the Home Department what reports he has received from the Metropolitan Commissioner of Police concerning traffic problems in North Ealing; and if he will make a statement.

Mr. Carlisle: The police are continuing to do all they can to deal with the problem of heavy lorries in residential streets


about which my hon. Friend wrote to the hon. Member last October.

Mr. Molloy: Is the hon. and learned Gentleman aware that there is not much improvement, and that the traffic problem in the Perivale, Greenford and part of Northolt are becoming extremely serious? Will he again get in touch with the Commissioner of Police and ask him to assist the local police in tackling this grievous problem and so ease the minds of many of my constituents who are seriously perturbed about it?

Mr. Carlisle: I am sure the police wilt do all they can to ease the problem. Any question of traffic regulation is of course a matter for the local authority. The duty of the police is to carry out the law, and I am sure they are doing all they can to enforce the law as it exists.

PRIME MINISTER (SPEECH)

Mr. Skinner: asked the Prime Minister whether he will place in the Library a copy of the public speech made on 5th May atThe Guardiandinner in London on the European Economic Community.

Mr. William Hamilton: asked the Prime Minister if he will place in the Library a copy of the public speech he made in London on 5th May concerning the European Economic Community.

The Secretary of State for the Home Department (Mr. Reginald Maudling): I have been asked to reply.
A copy of this speech was placed in the Library on 6th May.

Mr. Skinner: Vouz avez, avez-vows? [Laughter.]

Mr. Speaker: Order. I cannot hear the hon. Member.

Mr. Skinner: Est-ce que—

Mr. Speaker: Order. The hon. Member should try again, in another language.

Mr. Skinner: I accept your Ruling, Mr. Speaker. I was trying to explain to the House, particularly to those hon. Members who are pro-European, that as a result of the Prime Minister's meeting with M. Pompidou last night—[HON.

MEMBERS: "Question."] I am merely asking whether the Prime Minister took any French lessons before he met M. Pompidou in Paris.

Mr. Maudling: I think my right hon. Friend is fully briefed on every aspect of the problem.

Mr. William Hamilton: Did not the Prime Minister say that we should enter the European Economic Community with clear eyes and without self-deception? While it might be apparent to some of us that the long-term advantages of getting into the Common Market might be quite considerable, the short-term price we have to pay might be completely unacceptable. Will the right hon. Gentleman take good care that the Prime Minister will spell out in detail the short-term price we are bound to have to pay?

Mr. Maudling: It is surely one of the great problems with succeeding negotions that the short-term factors are very different from the long-term factors. In the economic field, the long-term factors are probably predominant, but it has been quite evident in debates in the House that both the long-term and the short-term considerations must be watched.

Mr. Harold Wilson: Will the right hon. Gentleman, while congratulating my hon. Friend on his French, which is about as good as the Prime Minister's and better than mine, in relation to the speech made by the Prime Minister at The Guardian dinner, give an assurance that in the talks now proceeding in Paris the Prime Minister will not enter into any commitment about nuclear pooling or about any special bilateral defence relationship with France, or hint that this may be part of an ultimate deal? This is of fundamental importance to the House's attitude to this question.

Mr. Maudling: As these talks are now taking place, as the agenda is confidential and as my right hon. Friend will be making a full statement to the House when he returns, it would be quite wrong for me to answer that supplementary question.

Mr. Wilson: Of course the agenda is confidential, and of course the talks are confidential until the Prime Minister makes a statement to the House, but this


point has been raised many times in the House and we are now confused by the amount of Press briefing on this question. Does not the right hon. Gentleman agree that the House is entitled to an assurance that there will be no commitment on this highly controversial question before there has been a report to the House by the Prime Minister and before he can get the authority of the House, which he will not get from this side of the House, to make such an offer?

Mr. Maudling: As the right hon. Gentleman says, this matter has often been raised in the House and my right hon. Friend the Prime Minister is clearly well aware of it.

Mr. Longden: If my right hon. Friend did take French lessons before going to Paris, may we learn the name of his teacher so that we may avoid drinking from the same obviously British source?

Mr. McBride: Is it the commonly held Government view that, as expressed by the Secretary of State for Trade and Industry, assuming we join the Common Market, in the short term there will be a savage downturn in our trade? Will he clarify the position for the House and the country?

Mr. Maudling: My right hon. Friend did not use that language or anything like it. I answered this point earlier when I said that there are short-term and long-term factors in this whole equation, some pluses and some minuses. We must weigh up the totality.

UNITED NATIONS (PRIME MINISTER'S VISIT)

Mr. Peter Archer: asked the Prime Minister if he will seek to make a further official visit to the United Nations.

Mr. Maudling: I have been asked to reply.
My right hon. Friend visited the United Nations last October on the occasion of its 25th anniversary. He has at present no plans for a further visit.

Mr. Archer: Is not the Prime Minister concerned to arrest the decline in British prestige at the United Nations occasioned by the Government's policies on South Africa and immigration? If the question

arises of the British seat in the Security Council, may we not find that we have too many enemies and too few friends?

Mr. Maudling: I do not accept either of the premises in that supplementary question. I do not agree that our prestige in the United Nations is falling. I certainly do not agree that our permanent membership of the Security Council is in question.

WEST MIDLANDS (UNEMPLOYMENT)

Mr. Carter: asked the Prime Minister if he has now decided to make an official visit to the West Midlands with particular reference to Birmingham.

Mr. Maudling: I have been asked to reply.
My right hon. Friend has this possibility in mind, but no specific plans have yet been made.

Mr. Carter: Is the Deputy Prime Minister aware that the unemployment situation in Birmingham has now reached desperate proportions, and is he aware that while there was a decline in the national figures as given today, the figures for Birmingham announced yesterday showed an increase? Is he further aware that for the national picture this shows, when seasonally adjusted, a very clear upward trend? What measures do the Government intend to take to halt this decline and to produce a situation in which increasing numbers of job opportunities are made available?

Mr. Maudling: Of course the figures give rise to concern. I believe that the wholly unemployed percentage in Birmingham is still below the national average. On the whole question of unemployment, the measures taken by my right hon. Friend the Chancellor in the Budget will have a significant effect.

Sir G. Nabarro: Would my right hon. Friend bear in mind that, in the Midlands, it is not only a question of Birmingham being affected by an exceptionally high rate of unemployment compared with their traditional rates, but also the dormitory constituencies around Birmingham, such as Bromsgrove and


South Worcestershire, and others, housing many thousands of motor workers, and that the turgid conditions of the motor industry today urgently require attention?

Mr. Maudling: Yes, Sir. The best cures for these matters are to carry out the measures in the Budget, to deal with the problems of wage inflation and to deal with labour relations.

Mr. Roy Jenkins: How would the right hon. Gentleman balance the likely effects of the Budget measures upon Birmingham's unprecedentedly high level of unemployment, compared with measures under consideration by his right hon. Friend the Secretary of State for Trade and Industry?

Mr. Maudling: The effect of the Budget on particular unemployment figures, as the right hon. Gentleman knows very well, is not exactly predictable and takes a good while to become apparent—particularly when many of the Budget measures have not yet come into operation.

Mr. Jenkins: The right hon. Gentleman did not begin to answer the question. The Budget measures were merely a promise. The question was related to the measures under consideration by his right hon. Friend the Secretary of State for Trade and Industry.

Mr. Maudling: It was a question which I thought my right hon. Friend answered very effectively a day or two ago.

NORTH-WEST INDUSTRIAL DEVELOPMENT ASSOCIATION

Mr. Kaufman: asked the Prime Minister what communciation he has received from the North-West Industrial Development Association concerning the unemployment situation in the North-West; and what reply he has sent.

Mr. Maudling: I have been asked to reply.
I have nothing to add to the answer which my right hon. Friend gave to a similar Question from the hon. Member for Manchester, Exchange (Mr. Will Griffiths) on 13th May.—[Vol. 817, c. 157.]

Mr. Kaufman: Why does the right hon. Gentleman refuse the request of the North-West Industrial Development Association to meet the Prime Minister so that it can put to him its request for intermediate area status for the area? In view of the fact that all these unemployment figures show that the number out of work in the Greater Manchester area has risen yet again, that the number of wholly unemployed in the North-West is up yet again and that the number of unfilled vacancies is down yet again, how can the Prime Minister be so callous and complacent?

Mr. Maudling: As my right hon. Friend explained on an earlier occasion, my right hon. Friend the Secretary of State for the Environment and my right hon. Friend the Secretary of State for Trade and Industry have recently been in touch with the Association, and its views are, therefore, well known to the Prime Minister.

Mr. Waddington: Is my right hon. Friend aware that many of us on this side of the House see little sense in turning more and more chunks of the country into either development areas or intermediate areas and that we believe that the Government are making the most valuable contribution by improving the environment and improving communications?

Mr. Maudling: I take note of what my hon. and learned Friend says.

Mr. Marks: Is the right hon. Gentleman aware that one of the factors in this matter is that public investment in the North-West is far lower than in the rest of the country, on average? Will he seek to assist this—the local election results will assist to some extent—by giving the North-West the same rights and grants for clearing derelict land as are given to Scotland and Wales?

Mr. Maudling: This assistance is pretty extensive and there are special provisions for areas of particular difficulty. As to the amount of public investment in that particular area in relation to the population, I should want to check the figures before accepting that premise.

Mr. Tilney: Would my right hon. Friend bear in mind the need for multipurpose capital investment in the infrastructure of the North-West, particularly


reclamation of the Dee and the More-cambe Bay barrage?

Mr. Maudling: Public investment in infrastructure of a multi-purpose character is one of the most important factors.

Mr. Frederick Lee: At Irlam in my constituency, where we face grave redundancies, there is no development area or intermediate area grant at all. On that basis alone, would it not be right for the Government to meet the development council from the North-West?

Mr. Maudling: As my right hon. Friend has explained, the views of the council are well known to him through his colleagues, my right hon. Friend the Secretary of State for the Environment and my right hon. Friend the Secretary of State for Trade and Industry.

Mr. Redmond: Would not my right hon. Friend agree that the main problem in Lancashire is to attract new industry, particularly from the South of England? Is he not aware that the shocking industrial relations of Merseyside reflect on the whole of the North-West, and could not publicity be given to other areas, such as Bolton, where industrial relations are extremely good and where we have the best quality of workers in the world?

Mr. Maudling: The solution to all these problems rests in stimulating more investment in the economy generally, and the Government's courses to that end are the Budget proposals of my right hon. Friend and the attack on the problem of cost inflation.

Mr. Crawshaw: Is the right hon. Gentleman aware that, especially on Merseyside, one of the worst aspects is the number of teenagers who have never worked yet? While the Government may, for electoral purposes, have wiped off Merseyside, nobody is entitled to wipe off the people of Merseyside as far as work in concerned.

Mr. Maudling: That is not the intention of any Government. I must repeat that the way to tackle the problem of unemployment, locally and nationally, is fundamentally to get economic expansion, which depends on dealing with cost inflation, on dealing with industrial relations, and on carrying through the Budget proposals.

EUROPEAN ECONOMIC COMMUNITY

Dr. Gilbert: asked the Prime Minister which Minister is responsible for the dissemination of information about the United Kingdom's possible accession to the European Economic Community.

Mr. Maudling: I have been asked to reply.
The co-ordination of all matters relating to the European negotiations is the responsibility of my right hon. and learned Friend the Chancellor of the Duchy of Lancaster. The provision of information on specific subjects is for the Minister primarily responsible.

Dr. Gilbert: Has the right hon. Gentleman noticed the curious coincidence that the print order of Government fact sheets on the Common Market is being quadrupled at the same time as public support has diminished almost to vanishing point? Would he identify cause and effect in this situation? Has the print order gone up because the public are so disenchanted, or are the public so disenchanted because they are learning more about the Common Market?

Mr. Maudling: The reason for publishing fact sheets is to give the maximum information to the public about a matter which, as the House would agree, is of fundamental importance.

Sir J. Rodgers: Does not my right hon. Friend agree that since my right hon. and learned Friend the Chancellor of the Duchy of Lancaster is doing such a magnificent job in the negotiations, it might be worth while to augment his efforts by allowing him a Minister of State, a junior Minister, to tour the countryside to explain how well he is doing in Europe?

Mr. Maudling: My right hon. Friend will doubtless consider that suggestion, too.

Mr. Harold Wilson: Assuming that whichever Minister is responsible for this is bilingual, would the right hon. Gentleman arrange to place in the Library or to circulate in the OFFICIAL REPORT a copy of the highly important text of the broadcast by President Pompidou a couple of nights ago in the French original and in the best Foreign Office


or Home Office translation into English? In this, would he give some guidance to the House, which is so far very deficient, whether the translation of President Pompidou's word "rupture"—[Laughter.] In case you could not hear me, Mr. Speaker, in English, "rupture"—

Sir G. Nabarro: Rapture, careless, rapture.

Mr. Wilson: The hon. Gentleman must make his own arrangements with his own surgeon in these matters. [Laughter.] May I continue my question? Will the right hon. Gentleman place this in the Library in French and in an authoritative version in English, giving the Government's translation of this word, which reads in French "rupture"—and which I understand is translated into English as "rupture"—of relations between Britain and New Zealand, which is apparently a condition of future negotiations? Since the B.B.C. in one translation said that it was "disruption", which is not the English translation of the French word, the second time did not translate it at all and the third time correctly translated it as "break", may we have the Government's view of what President Pompidou was saying?

Mr. Maudling: The right hon. Gentleman has raised an important point; I will consider doing that. Bilingualism is not a characteristic of all Ministers, certainly not of Home Secretaries. I follow the precedent of the late Sir Winston Churchill, who began one speech with the words, "Prenez garde: je vais parler Francais."

Mr. St. John-Stevas: rose—

Mr. Orme: The hon. Member is going to speak in Italian.

Mr. St. John-Stevas: The language of the Vatican is Latin, not Italian. Would it not be more to the point if the Leader of the Opposition, in any language of his choosing—French, English or anything else—gave the country some indication of where he stands on this vital issue?

Mr. Maudling: I sometimes wonder whether that problem could be elucidated even by the resources of the Vatican.

Mr. Harold Wilson: rose—

Hon. Members: Answer.

Mr. Wilson: I thank the right hon. Gentleman for his interest in these matters. Since he heard me say—I said it on television last week and I have said it in this House many times—that I want to get into the Common Market if the terms are right, and I am waiting to see whether the terms are right, would he say whether he disagrees with that, or whether he does not take the view that he would like to get in the Common Market if the terms are right?

Mr. Maudling: There is no mystery about that. Of course I want to get into the Common Market if the terms are right.

QUESTIONS TO MINISTERS

Mr. John D. Grant: On a point of order, Mr. Speaker. May I refer to Questions Nos. 21 and 45 on the Order Paper? Is it not the practice that when hon. Members decide to table Questions affecting the constituencies of other hon. Members they should at least do them the courtesy of informing them in advance?

Mr. Speaker: I think that that is the convention.

BUSINESS OF THE HOUSE

Mr. Harold Wilson: May I ask the Leader of the House to state the business for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. William Whitelaw): Yes, Sir. The business for next week will be as follows:
MONDAY, 24TH MAY—Supply [20th Allotted Day]: There will be a debate on an Opposition Motion on Steel.
Motions on the National Insurance (Married Women) Amendment Regulations and on the 1966 Act (Commencement No. 3) Order.
TUESDAY, 25TH MAY—Second Reading of the Pensions (Increase) Bill.
Motions on the Purchase Tax (No. 2) Order and on the Building Societies (Special Advances) Order.
At Seven o'clock, the Chairman of Ways and Means has named Opposed Private Business for consideration.
WEDNESDAY, 26TH MAY—Debate on a Motion to take note of the White Paper "An Alternative Service of Radio Broadcasting", Command No. 4636.
Consideration of Lords Amendments to the Rating Bill, the Misuse of Drugs Bill and the Fire Precautions Bill.
THURSDAY, 27TH MAY—A debate on a Motion to take note of the Second Report of Select Committee on Science and Technology, Session 1968–69, on Defence Research, and on the White Paper on Defence Procurement, Command No. 4641.
FRIDAY, 28TH MAY—The House will rise for the Whitsun Adjournment until Tuesday, 8th June.

Mr. Harold Wilson: Would the right hon. Gentleman confirm that the statement which the Prime Minister will make on his return from Paris will be made on Monday next, as we understand? Would he further take note, since I got no satisfaction from the Home Secretary on the question of any nuclear or defence deal, that should the Prime Minister have made any commitment, either specific or by way of some hint or undertaking, the House will want to debate this at a reasonably early opportunity?
Second, with regard to next Monday's debate which follows that statement—the debate on steel—is the right hon. Gentleman aware that there seems to have been no response at all to our request that there should be a statement—a now overdue statement—from the Secretary of State for Trade and Industry about the Government's plans for steel? We said that it would be quite unsatisfactory to get this in the middle of the debate. Are we to have a statement before the debate, will the right hon. Gentleman make a statement in the debate, or is he still dickering about, despite his undertaking to give the House an answer before this time?

Mr. Whitelaw: On the right hon. Gentleman's first point, my right hon. Friend the Prime Minister will make a statement on Monday on his talks with President Pompidou and will deal with all these matters then. On the second point, concerning the steel debate, I undertook last week to find out from my right hon. Friend whether he would be able to make a statement before the debate. I also

appreciated that the House did not wish a statement to be made in the debate. I made this position clear to my right hon. Friend. He is not in a position to make a statement this week. Therefore, in accordance with my undertaking, no statement will be made in the debate—

Hon. Members: Oh!

Mr. Whitelaw: That is what the House asked—

Mr. Harold Wilson: No.

Mr. Whitelaw: Oh, yes. I must tell the right hon. Gentleman that I was told last week, categorically, that unless a statement could be made in time, before the debate, if my right hon. Friend was not ready to do it, it was not to be made in the debate. That is what I was asked to do. In any case—[Interruption.] I am sorry if I am wrong. I should like to consult HANSARD to see what was said. I am always the first person to say when I am wrong, so I do not mind. It does not matter to me: if I am wrong, I am wrong.
In any event, my right hon. Friend will not be ready to make the considered statement which he has promised to the House because he has made it perfectly clear that he will make that statement only after the fullest possible consideration. He will not be ready to make that statement by Monday's debate, so it will not be made then—it will not be made before Whitsun.

Mr. Harold Wilson: I was going to say that our quarrel was not with the Leader of the House, because I am sure that he did his best to get his right hon. Friend to make a statement in the interests of the House as a whole and of that debate. But is he aware—in view of that heated little passage in the middle of his last answer—that we did not say that there should be no statement? We said that it would be bad to have it in the debate if it was not made before. If we do not have it before, the debate will be rendered a farce by the Government's ineptitude, because the right hon. Gentleman undertook two months ago that we would have a statement in six weeks.
Against that assurance, and in the light of the great feeling in steel constituencies as a result of the Government's policy, we put down this very serious Motion. The Secretary of State for Trade and


Industry seems incapable of devising a policy on steel. It is intolerable that, having waited so long, as we have postponed this debate, the Government still can make no statement, which should have been made before that debate—or failing that during the debate. Will the right hon. Gentleman represent this to his right hon. Friend?

Mr. Whitelaw: I would like to make the position perfectly clear. The right hon. Gentleman and his hon. Friends, as is their absolute right, decided to choose this Supply day for a debate on steel, and I fully appreciate their reasons for doing this in view of the considerable concern that is felt in many constituencies that are concerned with the steel industry. They did so without any assurance that a statement would be made before the debate.
I said that I would investigate the matter, and I found that my right hon. Friend would not be ready to make a statement before the debate. I have, therefore, made the position clear. He will not be ready to make such a statement until after Whitsun. The Opposition will be able to press their points in the debate, as I am sure they will wish to do, and I know that my right hon. Friend will answer them skilfully. [Interruption.] But he will not make a considered statement until he is ready to do so.

Mr. Harold Wilson: I am sorry to have to press the right hon. Gentleman further. I am sure that unconsciously he misrepresented what was said last week. The question was:
Wil the Leader of the House urge his right hon. Friend to make a statement on reorganisation in advance of the debate on Monday week so that we know the Government's policy on what we are debating, rather than have it announced afterwards?"—[OFFICIAL REPORT, 13th May, 1971; Vol. 817, c. 624.
That was perfectly clear. We wanted it before the debate. However, I did not say, as he will understand, that it should not otherwise be made.
In these circumstances, and since the Government have failed to make up their mind in time—[Interruption.] They have failed to make up their mind on steel policy, despite their assurances about their time-table. In recognising that a debate on steel must take place because of the

anxiety that exists—we have postponed it for too long already—will the right hon. Gentleman give an undertaking that when his right hon. Friend finally makes up his mind about steel policy Government time will be provided to debate his statement?

Mr. Whitelaw: I think the best way to help the right hon. Gentleman in this matter is to give him the assurance for which he asked in the last part of that supplementary question. [HON. MEMBERS: "Hear, hear] That is a fair way out of this difficulty. The Opposition have chosen one of their Supply days to debate steel, and that will occur next Monday. As soon as the Government are in a position to make the full and considered statement which my right hon. Friend promised, we will find time for a debate.

Mr. Harold Wilson: I thank the right hon. Gentleman very much.

Sir G. Nahum: Will my right hon. Friend bear in mind that it has taken two years to extract from this and the previous Government the name of the Chairman of the Review Body and that we are still without the names of the members of his Committee? Would it not be propitious next week for my right hon Friend to announce these names, and to include hon. Members of this House—for example, the hon. Member for Fife, West (Mr. William Hamilton) and myself—on this Committee to avoid the tortuous procedure of our having to troop before the Committee to give evidence?

Mr. Whitelaw: As my hon. Friend says, the name of the Chairman of the Review Body, Lord Boyle, has been announced. I agree that it would be propitious to announce the names of the other members next week, and I certainly hope that that will be done at the very earliest moment. I believe, in all the circumstances, that on a Review Body which is considering Ministers' and hon. Members' salaries it would not be suitable to have an hon. Member or right hon. Member of this House as a member, and there will not be one on it.

Mr. Loughlin: Perhaps I did not hear the right hon. Gentleman correctly. Did he say that he would announce the names of the members of the Review Body next week or at the earliest possible moment?


When he makes the announcement, will he also make abundantly clear the procedures that are to be adopted for the submission of evidence by hon. Members?

Mr. Whitelaw: I said that it would certainly be propitious to do so. Nobody has been more anxious than I have been to make this announcement, but I cannot promise absolutely to make it next week because this matter involves having discussions with certain people. I wish that I could guarantee to make the announcement next week, but I have no intention of making a promise to the House which I may find it impossible to carry out.
The answer to the hon. Gentleman's question about the way in which hon. Members will be able to approach this body is that I will get the terms forward as soon as I can.

Mr. Money: When will we have an opportunity to debate the White Paper on future policy for museums and galleries?

Mr. Whitelaw: I cannot say when that will be. The White Paper has only just been published and time is needed to consider it.

Mr. Willey: When the right hon. Gentleman makes his statement on the Review Body, will he make clear the terms of reference in regard to hon. Members' salaries.

Mr. Whitelaw: I did not say that I would make a statement. [Interruption.] The names will not necessarily be announced by me. I have had some discussions about the terms of reference, as I promised earlier, through the usual channels, and I am prepared to discuss them with any hon. Member. I think they will be found to be very broad and acceptable to the House.

Mr. Charles Morrison: Does my right hon. Friend yet know when the Minister of Agriculture, Fisheries and Food will be in a position to make a statement about the establishment of an inquiry into fowl pest, which is considerably worrying to a great many people now?

Mr. Whitelaw: I cannot say, but I will call the attention of my right hon. Friend to my hon. Friend's question.

Mr. Callaghan: Is the Leader of the House aware that the Opposition feels considerable dissatisfaction with the Home Secretary's handling of the Immigration Bill? Is he aware, as the manager of the Government's business, that we are constantly seeking information about the impact that the E.E.C. Treaty will have on the movement of Community nationals and workers in this country?
As we have failed to get a detailed reply from the Home Secretary, may we ask the right hon. Gentleman, since we are getting information about everything from inshore fisheries to New Zealand, for an authoritative statement from the Government about the impact that these regulations will have so that we can consider in Committee whether we are spending our time unnecessarily, particularly as the Home Secretary seems to think that there will be no impact at all?

Mr. Whitelaw: Without commenting on the first part of the right hon. Gentleman's supplementary question, I think it is true to say that my right hon. Friend answered some Questions on this issue earlier. [Interruption.] I have nothing to add to what he said.

Mr. Callaghan: The Leader of the House was not present at that time. Is he unaware that the Answer which his right hon. Friend gave earlier comprised the single monosyllable "No"? Does he agree that that is by no means a full statement of the likely impact of the E.E.C. on our position?
I therefore repeat my question. Will the right hon. Gentleman ask the Home Secretary to be a little more forthcoming and either set out in a document or make a statement about the impact that this will cause, so enabling us to get on with our work rather faster?

Mr. Whitelaw: I understand that my right hon. Friend answered some supplementary questions earlier on this subject. In any event, he has heard what the right hon. Gentleman said; and this is obviously a matter for him.

Sir H. Legge-Bourke: Reverting to the question of the Review Body, may I ask my right hon. Friend to convey as soon as possible to the noble Lord, Lord Boyle, the view that hon. Members on both sides of the House are particularly


anxious to ensure that he goes about his work not in a piecemeal or bitty way but conducts a really comprehensive exercise?

Mr. Whitelaw: I recognise that. I have had the benefit of a short conversation with the noble Lord and I have no doubt that he will do just as my hon. Friend suggests. Indeed, Lord Boyle is so well known in this House that hon. Members will support this view.

Mr. John Mendelson: Does the right hon. Gentleman recall that he was asked last week for a two-day debate on the Common Market negotiations before the Government commit themselves to any final agreement either at Luxembourg or Brussels? Does he appreciate that this matter has become all the more urgent since the Chancellor of the Duchy of Lancaster said that he would consult the sugar-producing Commonwealth countries before finally making up his mind in the negotiations in Luxembourg?
It is now contemplated that a further session will take place in July between the Six and the right hon. Gentleman. Is the right hon. Gentleman aware that a debate must be arranged between 7th June and the beginning of July to enable the House to discuss these matters before the Government finally make a commitment?

Mr. Whitelaw: The position was made clear in the exchange between the Leader of the Opposition and myself last week. I have nothing further to add to the answer I gave then.

Mr. Cordle: In view of the strategic importance of the Trucial States, may we be told whether the Foreign Secretary has had discussions with the sheikhs? Will he be making an early statement?

Mr. Whitelaw: I recognise the importance of the point raised by my hon. Friend. I will refer what he has said to my right hon. Friend the Foreign Secretary.

Mr. Elystan Morgan: The Leader of the House will recollect that about two weeks ago the Attorney-General promised to make a statement on the question of how far entry into the Common Market

would undermine the sovereignty of this Parliament. Can he now say when that statement will be made? Will it be made at a date before the Government commit themselves irrevocably to this European venture?

Mr. Whitelaw: I will look into the matter and discuss it with my right hon. and learned Friend.

Mr. Rost: Is my right hon. Friend aware of the increasing public concern and suspicion about creeping metrication, which does not appear to have authority from this House? Can we have a debate on the subject?

Mr. Whitelaw: I know the interest in this subject. Some time ago the Government promised a White Paper and in due course one will be published, but I cannot say exactly when.

Mr. Edward Short: Is the right hon. Gentleman aware of the widespread dissatisfaction among local authorities with the Government's Education (Milk) Bill, which, if passed, will prevent those local authorities which wish to do so from continuing to supply milk and pay for it out of the rates? Will he either withdraw the Bill or amend it before it comes to Second Reading?

Mr. Whitelaw: The right hon. Gentleman knows that all these matters can be discussed when the Bill is brought before the House for Second Reading.

Mr. Lawson: Reverting to the steel industry debate, may I ask the right hon. Gentleman whether he is aware that the Secretary of State for Trade and Industry gave a promise two weeks ago to about 20 hon. Members on this side of the House that the statement would be made before the end of this month? Is he further aware that the statements being made by the Corporation and the Government as to what is being investigated are at such variance that none of us on this side knows just what is being investigated? Will he ensure, so that we can have an intelligent debate on Monday, that we have information as to what is being investigated?

Mr. Whitelaw: I do not know of the promise to which the hon. Gentleman refers. However, I will consult my right


hon. Friend the Secretary of State for Trade and Industry and see that he appreciates what the hon. Gentleman has said.

Mr. James Hamilton: Will the right hon. Gentleman give an assurance that he will try to arrange a debate on the construction industry, bearing in mind the number of operatives unemployed, particularly in Scotland, and also the great need for houses and power stations? If the right hon. Gentleman were to give that promise, we on this side could give our ideas about the reflation of the economy and the provision of work, houses and power stations which are so urgently required.

Mr. Whitelaw: I realise the importance of what the hon. Gentleman has said, but I cannot promise time for such a debate in the immediate future. The hon. Gentleman has his methods of telling the Government exactly how he thinks these things should be done, and I am sure that he will use them.

Mr. Eadie: Can the right hon. Gentleman inform us when the Secretary of State for Scotland will make a statement about unemployment there in view of the intolerable figures announced today? Will he bear in mind that Scotland has the highest proportion in Great Britain of unemployment among the under-18s, and that this is building up,

and will continue to build up, into an intolerable social situation?

Mr. Whitelaw: I recognise the seriousness of the problem, but I cannot say when my right hon. Friend will make a statement. I will see that what the hon. Gentleman has said is called to his attention.

Mr. Molloy: What progress has been made with a view to having a debate on an issue which is causing grave concern —the computerised information being held by Departments of State and the rumours that commercial organisations can purchase it? The matter is causing grave concern to people both in this House and outside it. I understand that the right hon. Gentleman is making some investigation in relation to the Departments of State. When this is finalised, will there be a debate in the House?

Mr. Whitelaw: I recognise, as my right hon. Friend the Prime Minister did the other day, the public concern. My right hon. Friend said that he was investigating the matter and that as soon as he had any information to give to the House he would make a statement. That is the position. He will make a statement as soon as he is ready to do so.

Several Hon. Members: rose—

Mr. Speaker: Order. We must move on.

CIVIL LIST (SELECT COMMITTEE)

Mr. Speaker: Before I call upon the Chancellor of the Exchequer to move the Motion on the Order Paper, it may help the House if I indicate what I think should be the form of the debate on the Motion. I think that it would be convenient for a general debate to take place on the first part of the Motion—that is to say, the appointment of the Select Committee. At the end of the general debate, I propose to put the remaining questions dealing with the other matters.

3.55 p.m.

The Chancellor of the Exchequer (Mr. Anthony Barber): I beg to move,
That a Select Committee be appointed to consider Her Majesty's most Gracious Message of 19th May relating to the Civil List and other matters connected therewith.
As the House will be aware, it has been customary at the beginning of each reign to determine the amount which is required for the Civil List and for other matters connected therewith, and to incorporate the necessary arrangements in an Act which has normally lasted for the duration of the reign. This procedure was followed in 1952 at the beginning of the present reign. The Select Committee appointed by the House to consider these matters on that occasion recognised, in paragraph 6 of its Report, that
If, however, any considerable change takes place either in the burden of public functions laid upon Her Majesty or in the level of prices, it would be in complete accordance with constitutional practice for Her Majesty to send a further Gracious Message to Parliament asking that the original grant should be reconsidered.
The House will recall that on 11th November, 1969, the right hon. Gentleman the Member for Huyton (Mr. Harold Wilson), then the Prime Minister, made a statement about the Civil List. He referred to the history of this matter and to the fact that it was recognised in 1952 that the value of the provision then made would in real terms be eroded by cost increases over the years ahead. He went on to inform the House that the matter had been kept closely under review, that detailed discussions had been taking place between Treasury officials and the Queen's advisers and that the Government had informed the Queen's advisers

… that a new Select Committee would be appointed at the beginning of the next Parliament."—[OFFICIAL REPORT, 11th November, 1969; Vol. 791, c. 185.]
In the Gracious Message which I brought to the House yesterday, Her Majesty requests that consideration should be given in the light of developments since 1952, and I propose that we should repeat the procedure followed at the beginning of the reign by appointing a Select Committee to consider the provision which should now be made. The Government have certain proposals which they would wish to put before the Committee, and the Committee, after a thorough investigation of those proposals, will prepare a report for submission to the House. Thereafter, of course, the House will have an opportunity for full discussion of the Committee's proposals.
The procedure I am proposing is in accordance with precedent. On previous occasions, the Motion to set up a Select Committee was readily agreed to by the House, and, as I have said, there will be an opportunity for full discussion when the House comes to consider the Report of the Committee.

Mr. John D. Grant: I have two questions to put to the Chancellor of the Exchequer. First, in view of the fog which surrounds the Royal finances, will the meetings of the Select Committee be held in public? Secondly, in view of the means-tested society which the Government are intent on creating, will it be possible for the Select Committee to examine the Royal income as a whole, including the vast private fortune?

Mr. Norman Atkinson: Before the Chancellor replies to the questions put by my hon. Friend the Member for Islington, East (Mr. John D. Grant), I take it, Mr. Speaker, that we are still to have before us an Amendment which you have not yet announced as having been selected. I take it that we are going to debate that Amendment.

Mr. Speaker: I am acting in accordance with precedent. I am advised that the proper course is that if any hon. Member objects to a name when I am reading out the names proposed for the Select Committee he should shout "Object" and I then put that name separately to the House. That is the precedent.

Mr. Atkinson: Thank you for that clarification, Mr. Speaker. Before we get to that interesting part of the proceedings, there is a part of the Motion which concerns me and, no doubt, many of those employed in the Royal Household and on the Royal estates.

4.0 p.m.

I am convinced that it is the business of the Select Committee to inquire into the whole question of salaries and what is happening to the wages of employees, even though they may not be directly covered by the Civil List, because this question is closely related to the discussions which the Select Committee will have. I refer to those private incomes shared by members of the Royal Family which are not subject to normal taxation. There are exclusions specifically for the purpose of augmenting the Civil List and making it possible for the Royal Family to continue, to manage the Royal Estates and also, I understand, to pay reasonable wages.

Some trade unionists are concerned about the productivity agreements which have been negotiated by the Duke of Edinburgh himself. The famous potting shed agreement is one with which we are not quite satisfied. These are the sorts of questions which should be discussed by the Select Committee. No other body can do it.

Many of us on this side saw with some surprise that the Motion provides that witnesses should voluntarily come before the Select Committee. I understand that this is unusual, in the sense that the normal routine is for a Select Committee to have powers to demand to see papers and to subpcena witnesses to appear before it.

It is essential that Her Majesty herself should, if necessary, be asked to submit evidence or be questioned about the accounts. Perhaps the Duke of Edinburgh should, like any other member of society, be asked to submit evidence about the management of the Household and other relevant matters. It is wrong that on this occasion there should be a departure from custom, in that the Select Committee will not have the right to subpcena witnesses or to call for papers. I am certain that many of those who will want to submit evidence to the Select Com-

mittee will want to demand sight of papers, accounts and other necessary information before a fair and proper decision is taken about the future size of the civil list.

The Government should agree to amend the terms of the Motion so that it can be seen that the Select Committee has full powers to demand the papers it requires, thereby giving answers to many trade unionists who will be putting some pertinent questions to the Select Committee.

Mr. George Lawson: On a point of order, Mr. Speaker. I should like to be clear about just what can happen. The Motion lists 17 names. I understand that the names are to be put to the House individually and that there can be objections to any one of them. Every one of the names could be objected to. If one of the names were to be challenged and deleted as the result of a Division, would the House go on to select somebody else, or would we be left with 16?

Mr. Speaker: The answer is that we would be left with 16.

Mr. Robert Sheldon: Further to that point of order, Mr. Speaker. Will the Division be called immediately the objection is raised, or will the Division be called immediately after the names have been called?

Mr. Speaker: This is a matter to be governed by the convenience of the House. In accordance with precedent, I do not propose to select the Amendments in the name of the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis). The hon. Gentleman will have an opportunity to object to any particular name when I read out the list of names. On objection being taken, I would then propose the Question upon that name for the House to decide whether or not to accept it.
Perhaps I may now give a warning about the scope of that debate. Although it would be in order to discuss the qualifications of a Member to serve on a particular Committee, any criticism of that Member of the House can be raised only on a substantive Motion. So the debate may he narrower than some people may think.

Mr. Lawson: Further to that point of order, Mr. Speaker. You will notice that line 5 says:
That the Committee do consist of Seventeen Members.
If one Member dropped out, what would the situation be?

Mr. Speaker: If it were to be the will of the House that one Member should be deleted it would be possible to add another Member at a later stage. At the moment we are discussing the first two lines, namely, the question whether the Select Committee should be appointed. If we can get that out of the way, we can then go on to the other matters.

Mr. Kenneth Lewis: On a point of order, Mr. Speaker, before I manage to catch your eye to speak. The House is now debating the substantive part of the Motion. Can I speak relative to my Amendment on the substantive Motion?

Mr. Speaker: Only in general terms.

Mr. Kenneth Lewis: Can I try to do so in general terms and we will see how we go? Perhaps I could come in later, if necessary.
My Amendment is clear. There is nothing personal intended against the hon. Member for Fife, West (Mr. William Hamilton). I have tabled my Amendment because of the hon. Gentleman's attitudes, not because of his personality. The hon. Gentleman and I respect each other's views. If I had not been speaking in these terms on my Amendment—

Mr. Speaker: The hon. Gentleman said that we would have to see how we go. I think that we have gone far enough already. It is quite clear from the way the hon. Gentleman has begun that his remarks would be more appropriate at a later stage. We are now on the general question whether a Select Committee be appointed.

Mr. Arthur Lewis: I think that the Government are wasting the time of the House. I am not sure that there is any need for a Select Committee. I am not opposing its appointment. In fact, I am supporting it. I have doubts about whether this is the best way of proceeding. It may well be the convention.
The Chancellor has told us that he already knows what the Government will propose to the Select Committee. If and when the Select Committee is appointed, the Government will tell the Select Committee what the Government have in mind. This is wasting the time of 16 or 17 hon. Members, because they will be unable to send for persons or papers. It is unnecessary for the Government to have a Select Committee. That would deal with the question whether there should be 16 Members or 17 and whether my hon. Friend the Member for Fife, West (Mr. William Hamilton) should serve on the Committee.
Why should not the Government tell the House now what they have in mind? Why cannot the Chancellor tell the House that he will agree to recommend an increase of 66 per cent., which is what the Government did for the chairmen of the nationalised boards? No one except me objected to that. That was followed by a 66 per cent. increase to the higher paid civil servants. Again, no one objected except me.

Sir Gerald Nabarro: The hon. Gentleman must not say that no one else objected.

Mr. Speaker: Order. We cannot pursue the question of the salaries of the chairmen of nationalised industries and of higher-paid civil servants.

Sir G. Nabaffo: On a point of order, Mr. Speaker. A grossly inaccurate statement has been made. I protested loudly, clamantly and continuously about this matter.

Mr. Lewis: Perhaps it will satisfy the hon. Gentleman if I say that after I objected he followed suit.
I have no intention of discussing the salaries of the chairmen of nationalised boards. They have been agreed. All that I am doing is to produce evidence to show why it is not necessary to appoint a Select Committee in this instance. In the two cases to which I have referred, the Government acted with alacrity—

Mr. Speaker: Order. The hon. Gentleman said earlier that he supported the setting up of a Select Committee, but he is now saying that it is not necessary. I am not sure where we are.

Mr. Lewis: I am putting forward the pros and cons. It may be that other hon. Members, including the hon. Member for Worcestershire, South (Sir G. Nabarro), have not yet made up their minds. It may be that the hon. Gentleman will again wish to oppose the proposal. I am giving him and other hon. Members the arguments for and against so that they may consider the position.
Here is an opportunity for the Government to save the time of the House by stating publicly the amounts that they have in mind so that we can debate them.

Mr. Speaker: Order. Example is better than precept when it comes to saving the time of the House.

Mr. Lewis: I was going on to give a more recent example, and it came when, under a Tory Government, the Tory-controlled Greater London Council increased by £73 a week the salary of one of its officers who was already in receipt of £9,000 a year. Not a murmur came from any hon. Member opposite, including the hon. Member for Worcestershire, South.

Sir G. Nabarro: Quite wrong.

Mr. Lewis: It may be quite wrong—

Sir G. Nabarro: No. I was saying that the hon. Gentleman is quite wrong in imputing to me a lack of opposition to these exorbitant increases in salaries. I have protested loudly, clamantly and continuously.

Mr. Lewis: I am pleased to hear that. If we had a debate now on the proposed increases which the Chancellor of the Exchequer has in mind, it might be that the hon. Member for Worcestershire, South would want rightly to protest. On the other hand, it may be that he would say that the right hon. Gentleman's proposals were not sufficient.
When it suits the Government they attack £1 a week extra far those on lower incomes. Every day of the week we have some Minister, talking about cost inflation and large salary increases, saying that we should cut down. I am afraid that we may have the same situation again. If we set up a Select Committee, the Government may come forward with a proposal which is considered to be too much. Who knows, we may then have Ministers saying that the Government's

proposals are highly inflationary and will lead to further cost inflation. If that were to happen, I should prefer it to be done on the Floor of the House before a Select Committee is appointed.

4.15 p.m.

Then again, a Select Committee might delay matters. I do not want to see any delay. Only today, I heard the Leader of the House say that he has still not appointed the members of Lord Boyle's Committee. It took two years to appoint the chairman, and to this date we still have not been told who the members are to be. We do not know when the proposed Select Committee will report. It has been suggested that it might not be until the autumn. This Motion has been put down one day after the announcement. It appears from that that the matter is urgent. Speaking for myself, after 17 years, I think that 66 per cent. would be a fair figure. Perhaps the same will be given to Members of Parliament. In any event, the matter would be expedited by getting the Select Committee working quickly.

Then I look at the names which appear in the Motion. I shall not move on to the Amendments. That would be out of order. Line 5 of the Motion reads:
That the Committee do consist of Seventeen Members",
and then follows a list of names, the first of which is Mr. Joel Barnett. If I may say so, he is an honourable, intelligent man who possesses expert economic knowledge. That is a very admirable selection, though I do not claim for a moment that my hon. Friend is what is known in this House as an "old" Member, either in age or experience.

The next name is that of Mr. Boyd-Carpenter. He is a very old Member of this House. He happens to be a Privy Councillor.

Then we have Mr. Chancellor of the Exchequer, who comes somewhere between both. He is a Privy Councillor, but he is not old. However, he has made up his mind already. He said that he has a figure in mind which he has not yet disclosed to anyone, as far as I know. Only he knows.

Then we have Mr. Chichester-Clark. He name is followed by that of Mrs. Peggy Fenner. She certainly is not an old Member. I have no doubt that she is


knowledgeable about this matter because she is a member of the fair sex and well suited to give advice.

The next name is that of Mr. W. W. Hamilton. He is greatly respected and a senior Member of the House. He will be very useful in the Committee. I support his nomination because he does not happen to be either a newcomer or a Privy Councillor. My hon. Friend is a senior Member of great knowledge and experience, and I suggest that he is the only back bench hon. Member who is truly representative of the overwhelming majority of Members of the House— [HON. MEMBERS: "No."]

This House overwhelmingly consists of Members who are not Privy Councillors. The Privy Councillors are in the minority, but they have the majority in both views and opportunities. Going through the list we see that each Member of the Select Committee is a Privy Councillor, a Minister or an ex-Minister, with the exception of the one or two newcomers and my hon. Friend the Member for Fife, West.

May we be told how this democratic decision was arrived at in the first instance? I know that we shall have an opportunity of voting. However, I understand that in Communist countries the Kremlin selects the yes-men. The parties can then either agree or reject them, but they cannot put forward alternatives. We have not had that opportunity here, and I do not think we shall get it. We must agree en bloc to this list. We have no opportunity of putting forward anyone else. This is not in accordance with good democratic practice.

It may be that other hon. Members might have been recommended by back benchers. I suggest that in future an opportunity should be given to all hon. Members to put forward their views—[An HON. MEMBER: "And their claims."] Yes, and their claims if need be. We all represent constituents. No hon. Member, whether a Privy Councillor, a Minister or an ex-Minister, should take precedence over any other Member when it comes to stating the voice of the people that he represents. Hence, this is not a good democratic procedure; this is not the best way of proceeding.

I hope that we shall get the Committee's report quickly. No statement has been made on how long it will take before

reporting. Hon. Gentlemen may giggle as much as they like. I am interested that Members of Parliament have also been waiting for seven years, particularly ex-Members who have been shabbily treated by both Governments.

I do not want the Queen and the Duke of Edinburgh to be kept waiting and to be shabbily treated. We have had experience during the last year of the Govenment treating the sick, the disabled, the old and the unemployed in a shabby way, and I am afraid that they might not be fair or reasonable in this connection.

I should like the Government to say, "We will do the right thing, and we will do it openly. We shall be as generous as we have been to the higher paid." I do not want them to adopt the attitude they have taken with the poorer sections of the population—the postmen, the engineers, the bricklayers and the carpenters.

Mr. George Lawson: There must be many hon. Members with the same doubt as myself. I do not presume to speak for them; they will no doubt speak for themselves.
I have no objection to the setting up of the Committee provided that there is no serious change in its composition. If the composition of the Committee were to be seriously changed, I might feel very strongly about it.
My hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) has pointed out that among the 17 Members proposed for the Committee there are nine Privy Councillors. We normally accept that Privy Councillors are honourable men and we often accept their judgment. Nevertheless, the House of Commons is being asked to agree to substantial sums of money being expended. On that basis we are entitled to consider the composition of the Committee and how it is weighted in that direction. Although the Members come from both sides, there is a fairly heavy weight of Privy Councillors—nine out of 17. They could be taken as most likely to arrive at the kind of conclusions which will be recommended to them. I say this without animosity or feeling against anyone. This is how right hon. and hon. Members tend to go on.
I should like the Members of a Committee of this kind to be critical of suggestions put to them. There is the possibility of a minority report. I understand


that the Chancellor of the Exchequer has certain propositions to put forward. Perhaps certain sums might be greater than the sums which have been requested. I should expect to hear about such a proposition before settling the first question.
It is possible that certain hon. Members or one hon. Member may wish to submit a minority report and that that report might be submitted to the House. I repeat, I should expect a Committee of this kind to contain some members who might be critical. I do not suggest that they should be jaundiced, but critical. If we were to conclude that the Committee would be so altered that its critical content would be undermined, I should do everything I could to ensure that the House expressed its view on the point. If any Member or Members wish to make a minority report, will it be submitted to the House? May we be assured that, for example, Members will not be dropped? We have nine Privy Councillors as members of the Committee, which I do not take as properly representative of this House. I am anxious that we should not be confronted by one or two other Members being dropped. I am prepared to accept the Committee as it is to be set up, but I should not be prepared to accept any change in its composition without making some protest.

Mr. Leslie Spriggs (St. Helens): Earlier a question was raised whether the Select Committee should sit in public. I submit to you, Mr. Sneaker, and to the Chancellor of the Exchequer, that, in the interests of the people and of right hon. and hon. Members, it should sit in public. Will the Chancellor of the Exchequer now give us his reply?

Sir G. Nabarro: Why not televise it?

4.30 p.m.

Mr. Barber: A number of hon. Members have raised the question whether the setting up of a Select Committee is the best way of dealing with this matter. This question was raised particularly by the hon. Member for West Ham, North (Mr. Arthur Lewis). Having looked at the precedents, I believe that it is.
I assure those hon. Gentlemen who have been somewhat concerned that there should be a limited number of hon. Members on the Committee, that the Committee's report will, in due course, be made to the House, that there will be an

opportunity for hon. Members to express views on the report, and that they will no doubt be taken into account by the House.
The hon. Member for West Ham, North (Mr. Arthur Lewis) complained that I, on behalf of the Government, would be putting forward certain proposals. But the object of that is to assist the Committee. At the end of the day it is for the Committee to decide what report it chooses to make. The Motion directs
That the several Papers presented this day relating to the Civil List be referred to the Committee".
That reference is to statistical information, material which comprises an analysis of the Civil List expenditure since 1952, including information about the disposal of the contingencies margin established then and various matters that will be of assistance to the Committee.
The hon. Member for Tottenham (Mr. Atkinson) raised a point about the form of the Motion and the wording concerning witnesses. We are following the precedents of 1947 and 1952 by empowering the Committee
… to examine all witnesses who voluntarily appear before them, and to report to the House their observations …
I should remind hon. Members, because this is of particular significance, that that form of words followed a review of procedure by the Officers of the House, it makes it clear that there will be evidence, even though, out of respect for the Crown, the witnesses who give it will appear voluntarily and not by compulsion.

Mr. Atkinson: Some of us raised these matters because we are concerned with the constitutional relationship to which the right hon. Gentleman is referring. We fully understand the difficulties about serving a subpoena on such witnesses. We now want to change the relationship and follow the pattern set by the Scandinavian countries. We are arguing for a change, not for following the precedents of 1947 and 1952. They are no good reasons for doing the same thing again. Now is the time for change. Cannot the right hon. Gentleman concede something here?

Mr. Barber: I see no point in making a concession on this aspect, because there is nothing to indicate that, after the review by the Officers of the House and the


subsequent adoption of the words recommended, any difficulty was apparent to the Committee that considered these matters on a previous occasion. The circumstances here are exceptional. If this procedure has worked well in the past there is a very good reason for adopting it now.
The possibility of a minority report was raised by the hon. Member for Motherwell (Mr. Lawson). This is a matter for the Select Committee, under the rules of order, taking into account the precedents. It is certainly not a matter for me, if the Committee should decide, in accordance with precedent, to elect me as its Chairman.

Sir Harry Legge-Bourke: I do not know whether my right hon. Friend is inadvertently saying something which he has not had an opportunity to give full consideration to. As I have always understood the rules of Select Committees, it is not possible for a Select Committee under existing practice to issue a minority report, or for any member of it to do so. All that is possible is for Amendments to be moved to the proposed draft of the report. Those Amendments are voted on and then appear in the record of the proceedings.

Mr. Barber: Certainly that record appeared in the previous report and I have no doubt will appear in the report this time. I was telling the hon. Member for Motherwell that it is not a matter for me as the Member who may be elected as Chairman of the Select Committee to say what the Committee may or may not do. It is a matter for the rules of the House and precedent.

Mr. Lawson: Could not the right hon. Gentleman have discovered whether it was possible? My experience of another committee is that it is possible, in contradistinction to what the hon. Member for Isle of Ely (Sir H. Legge-Bourke) said. Surely, we can learn before we go forward whether it is possible to attach to the report what could be seen as a minority report?

Mr. Speaker: Order. The House must not get too concerned about this matter. The Chairman of any Select Committee cannot prevent any member of it from moving an Amendment or an alternative report, which is in effect a

minority report. There is no question of the Chairman's discretion. It can be moved by a member of the Committee. Although it is technically not a minority report, in effect it is, and it appears in the record.

Mr. Barber: That is what happened on previous occasions. It is obviously open to any hon. Member and those who support him in the Lobby to make their point in that way.
The hon. Members for Islington, East (Mr. John D. Grant) and St. Helens (Mr. Spriggs) asked whether the Committee would sit in public. That is a matter for the Committee to decide. Hitherto it has always sat in private.

Sir G. Nabarro: Yes, but my right hon. Friend will recall that Members of the House of Commons and of the House of Lords are enabled to attend the Committee as observers at any time, though they are bound by the rules of secrecy not to divulge what goes on. Mr. Speaker in the last Parliament ruled at the end of a particular Select Committee in 1969 that newspapers might divulge from any source from which they cared to obtain it information on what went on in the Committee in advance of the Committee's report. Mr. Speaker ruled that in the final stages when matters of impropriety were imputed.

Mr. Barber: Right hon. and hon. Members will have noted what my hon. Friend has said.
The question of the Queen's private resources was also raised. It will be appreciated that broadly speaking the object of the review is to enable the Queen to maintain an adequate standard of service to the nation. That is the matter we shall be considering. It has hitherto been thought to be an appropriate charge on public funds, but the Queen's resources in her private capacity do not come into this. Again, I believe rightly, we are following precedent.
A number of other questions were raised concerning the substance of the matter which is to be considered by the Select Committee. I am sure that they will be noted by the Select Committee, and will be taken into account in formulating its report.

Mr. R. T. Paget: I am a little alarmed by what the right hon.


Gentleman said at the very end of his speech. Historically, when the monarch asked the House for aid the House was inclined to take the view that he should live on his own, and that involved maintaining all the public services. To go to the other extreme, where the monarch's own should be altogether ignored, takes the matter very much too far. After all, the monarch has resources in the form of the Civil List. She has resources in the form of tax privileges which should be considered, and a personal fortune and the result which those tax privileges have on that personal fortune.
If Her Majesty tells the House, "Owing to increased prices I should have a higher Civil List", which I understand she is doing, the House should also consider the other effect of those increased prices. If it should emerge that Her Majesty is richer today than she was 17 years ago, on the granting of the present amount, by some scores of millions of pounds, that is a matter which at least is relevant to the consideration of whether there should be increases.
This inquiry and this Select Committee will not carry conviction to this House and will in fact, do a disservice to it—I am a monarchist and I desire to see the popularity of our Royal House maintained—if there is something hidden under the counter into which we are not allowed to inquire, into which the public are not allowed to look, and about which all the newspapers can speculate, and doubtless exaggerate. I hope very much that that aspect will be considered, and that the questions of tax privilege and private fortune will be open to consideration by the Committee.

Mr. Charles Pannell: I should like the Chancellor of the Exchequer to reconsider his last few words. The right hon. Gentleman and I are probably in the same position. He is the hypothetical Chairman of the Select Committee and I am a hypothetical member of it. I do not think that the right hon. Gentleman can say anything here which can limit the inquiries of the Select Committee when it meets. There is no question but that a Select Committee is the master of its own proceedings. That is why we protect it with privacy, privilege, and so on. I should not like it to be thought that we could be inhibited in this way.
If what has been said were to pass for fact, I should have to consider whether I could serve on the Select Committee at all. I must make that clear. I also want it known that nothing that the Chancellor says in this House limits the Select Committee, because this is not a Government affair, but a House of Commons affair and I know as well as anyone does how Select Committees work, and how they have worked over a long time. There are plenty of precedents for dissenting voices in the Committee and they have been recorded over the last century.

Mr. Stanley Orme: I underline the point made by my hon. and learned Friend the Member for Northampton (Mr. Paget), and by my right hon. Friend the Member for Leeds, West (Mr. C. Pannell). The Chancellor of the Exchequer, as Chairman-elect of the Select Committee, has a great responsibility in this matter, because he and the Government have been talking to trade unionists, have been urging independent inquiries, have been setting up independent inquiries, have been making sure that all the facts are presented, and have been making sure that the case is made known publicly. Trade unionists have had to face those issues at recent inquiries—such as Wilberforce, and others—and it is therefore only right that justice is seen to be done in the same way by this Select Committee.
The fact that a Select Committee is set up by the House does not alter the basis of the inquiry, because it, too, will be dealing with income, expenditure and responsibility, and in that regard it appears, from some other things that the Chancellor has said, that he has been trying to round off the edges. The Select Committee ought not to be seen in that light at all. It ought to examine all the facts and then make its recommendations, so that the House and the country can see everything that has been laid out by the Committee.

Mr. Speaker: The proposal is to set up a Select Committee to consider Her Majesty's most gracious Message of 19th May relating to the Civil List and other matters connected therewith. The interpretation of that must be a matter for the Select Committee, not for this House,


and I think that it really would be out of order to have any further debate on it now.

Question put and agreed to.

Ordered,
That a Select Committee be appointed to consider Her Majesty's most gracious Message of 19th May relating to the Civil List and other matters connected therewith.

Ordered,
That the several Papers presented this day relating to the Civil List be referred to the Committee.

Ordered,
That the Committee do consist of Seventeen Members.

Motion made, That Mr. Joel Barnett, Mr. Boyd-Carpenter, Mr. Chancellor of the Exchequer, Mr. Chichester-Clark, Mrs. Peggy Fenner, Mr. W. W. Hamilton, Mr. Douglas Houghton, Mr. Roy Jenkins, Miss Joan Lestor, Sir Fitzroy Maclean, Mr. Charles Pannell, Mr. Norman St. John-Stevas, Mr. John Stradling Thomas, Mr. Jeremy Thorpe, Mr. Turton, Mr. William Whitelaw and Mr. Harold Wilson be Members of the Committee.

Mr. Speaker: The Question is,
That Mr. Joel Barnett, Mr. Boyd-Carpenter, Mr. Chancellor of the Exchequer, Mr. Chichester-Clark, Mrs. Peggy Fenner, Mr. W. W. Hamilton—

4.45 p.m.

Mr. Kenneth Lewis: Object. My objection is in conformity with the Amendment that I have tabled, and I shall limit what I have to say, because I understand that there is a certain restriction on me in any case.
I say at the outset that if the hon. Member for Fife, West (Mr. William Hamilton) had not been selected for appointment to this Committee, and if I therefore had not objected to his nomination, he would have objected to the setting up of the Committee. One of the reasons why I object to the hon. Gentleman being appointed to the Committee has, I think, been made clear by the hon. Member for Motherwell (Mr. Lawson), who said that it was right that this Select Committee should consist of hon. Members who would look at the

proposals put before it with a certain amount of opposition—and I agree with that; I should not expect any Select Committee to be entirely one-sided—but he went on to say that there should be on the Committee hon. Members who were not entirely jaundiced.
I believe that the hon. Member for Fife, West is entirely jaundiced. I believe that he is a republican. He has expressed strong republican views.

Mr. Arthur Lewis: On a point of order, Mr. Speaker. Is it not out of order falsely to accuse an hon. Member who has taken the oath of allegiance of being a republican? My hon. Friend the Member for Fife, West (Mr. William Hamilton) has never declared himself to be a republican. He has taken the oath of allegiance. He is an honourable Member of this House. The hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) should not be allowed to accuse my hon. Friend of being a republican, when he is a loyal Member of this House and has sworn the oath of allegiance.

Mr. Speaker: I think that the line of demarcation is very difficult to draw in discussing qualifications. It is in order to discuss qualifications, but any criticism of an hon. Member can be raised only on a substantive Motion. I think that if one went back to the last century one would realise that the idea that it was out of order to accuse an hon. Member of being a republican would seem very odd indeed. That allegation was frequently made. I think that the hon. Member who has the Floor of the House may proceed.

Mr. Paget: Mr. Speaker, as the successor of Bradlaugh and Labouchere, may I concur with your observations?

Mr. Kenneth Lewis: I think that the hon. Member for Fife, West has declared himself on this issue on several occasions. He has made it clear that he is not in favour of any increase in the Civil List. I believe that he will sit on this Committee quite destructively. That is what I believe the situation to be, and that is my first reason for objecting to the hon. Gentleman's appointment to the Committee.
My second reason for objecting to his appointment is that he has been manoeuvred on to this Committee by


the Leader of the Opposition who takes the view, "If you cannot get him to join, draft him". I think that the hon. Gentleman has been drafted on to this Committee on the basis that what he says in the Committee will be better said there than on the Floor of the House this day, which is when he would express his view were he not appointed to the Committee.
The Opposition are getting very adroit at manipulating Select Committees. A Select Committee is a matter for the House of Commons. It is not a matter for the Government or for the Front Bench opposite. I repeat that it is a matter for this House, and that the Opposition are getting too adroit at this kind of manipulation. For ideological reasons the Leader of the Opposition has drafted the hon. Member for Fife, West on to this Committee. This is the second time that this kind of thing has happened. A week or so ago it happened in the other direction. The Leader of the Opposition, acting through his Chief Whip, removed the hon. Member for Wallsend (Mr. Garrett) from the Services Committee, for party disciplinary reasons. This is something that backbenchers have to watch very closely, for it is not right that Select Committees should be manipulated in this way.
My third reason for objecting to the hon. Gentleman's appointment is slightly more complex. It is because I am not certain that the hon. Gentleman will maintain confidentiality on this Committee.

Mr. Speaker: Order. I think that is going too far.

Sir G. Nabarro: On a point of order, Mr. Speaker. Your predecessor ruled in 1969 that there was no confidentiality in a Select Committee. Permission was given for any Member of either House of Parliament to sit in on a Committee as an observer. Your predecessor distinctly ruled that the fact that the Daily Mail had published a trailer of what the Committee's report was to say was quite in order and that there was no breach of privilege. Does it not follow that no confidentiality at all is required in connection with a Select Committee?

Mr. Speaker: That is an interesting matter to be put in parenthesis. However, I do not think it is permissible to impute

to another Member of the House that if he were to sit on a Committee whose proceedings were confidential he would break that confidence.

Mr. Lewis: I said that I expressed a doubt and I am prepared to withdraw it. However, I want first of all to quote why I believe there is some doubt, because I feel that this is relevant. I have waited for some time for this situation to arise.
On 24th July, 1968, the hon. Member for Fife, West made some remarks when the House was discussing a report of the Committee of Privileges. At the time the hon. Gentleman was Chairman of the Estimates Committee, and was a very good chairman under whom I sat as a member. I had heard that he proposed to get up in the House and suggest that it was all right for anybody in the House to give to the Press, in this instance the Observer newspaper, matters which related to the Estimates Committee. I asked him about his intentions on this matter, and as a result I resigned from that Committee—on which, incidentally, I enjoyed working.
In the course of that debate the hon. Gentleman said:
What the Committee was discussing was a very secret, and in some respects very sinister, research establishment.
I do not want to equate that passage with the Royal Household, though it may well be that the hon. Member for Fife, West would wish to do so. [HON. MEMBERS: "Oh."] The passage goes on:
At least there is a deep suspicion that a good deal of sinister activity is going on there, and my hon. Friend, rightly or not, thought it his duty to throw the light of publicity on to that establishment."—[OFFICIAL REPORT, 24th July, 1968; Vol. 769, c. 594.]
He was referring there, of course, to a defence establishment. We see there the line being taken by the hon. Member for Fife, West. I would like to have an assurance that in this particular case he does not intend to use whatever documents he may have access to in the Select Committee in the same way, as appeared to be acceptable to him on that earlier occasion. It is for these three reasons that I object to the name of the hon. Member for Fife, West going forward for that Select Committee.

Mr. Roy Jenkins: The hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) has


made a most offensive and ill-judged speech. I would never be against the rights of a minority voice being heard in this House—and I have no doubt that the hon. Gentleman's is a minority voice —but it is unfortunate when such a voice seeks to misrepresent the views of somebody else, as has happened today. The hon. Gentleman's speech was lacking in any sense of historical perspective—as you, Mr. Speaker, were forced to point out—and in any sense of the feeling of the House itself.
I believe that my hon. Friend the Member for Fife, West (Mr. William Hamilton) will be a most valuable member of this Committee. I believe that unless he wished to be a member of the Committee he would not have agreed to serve upon it. If the House is to follow the hon. Gentleman and seek to exclude a particular hon. Member, then this can be done on both sides of the House and at the end of the day we may not get a Select Committee. I hope that the House will not be disposed to follow that course, but will treat the hon. Gentleman's argument with a degree of contempt and will now proceed rapidly.

Mr. Norman St. John-Stevas: I wish to make a brief intervention to express my regret about the objection that has been made by my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis). The three reasons he gave do not hold water. I hope that the hon. Member for Fife, West (Mr. William Hamilton) will exercise a self-denying ordinance and will not feel it necessary to make a reply himself, but will leave his defence in the hands of those who may be able to take a more impartial view of his merits. I know that he would lay no claim to royal blood, but he would not object to its being said of him that he has a noble nature. This is a case of noblesse oblige.
With regard to the point made by my hon. Friend about confidentiality, nobody who knows the hon. Member for Fife, West would consider that to be a point that he had any need to answer. I do not intend to refer further to that matter.
My hon. Friend also implied that the hon. Gentleman was drafted on to the Committee against his will as some kind

of manoeuvre by the Leader of the Opposition. This both over-estimates the capacities of the Leader of the Opposition and under-estimates the powers of resistance of the hon. Member for Fife, West. If the hon. Member is on the Committee, it is because he wishes to serve on it and responded affirmatively to an invitation which was freely offered.
With regard to my hon. Friend's point about the qualifications of the hon. Gentleman to serve because of his views, the House knows that my view on that aspect could not be more opposed to the views held by the hon. Member for Fife, West. However, although the views held by the hon. Gentleman on the Civil List may be controversial, these are views which he honourably and sincerely holds. Indeed, this is a qualification for membership of the Committee rather than a disqualification. If the Committee has any point, it is to represent the whole conspectus of views to the House, whether of the majority or of the minority; and in the House of Commons the voice of a minority, however small, has a right to be respected and represented.

Mr. Barber: Since it fell to me to move the Motion, I should like to say to the House that I hope very much that at the end of the day, when we have disposed of this business, the hon. Member for Fife, West (Mr. William Hamilton) will be a member of this Committee.

Mr. Eric S. Heifer: I have only one comment to make. I also took part in the debate to which the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) referred. I, too, endeavoured to put up some defence for my hon. Friend the Member for West Lothian (Mr. Dalyell) who was involved in that incident. As a matter of fact, I disagreed with certain comments made by my hon. Friend the Member for Fife, West (Mr. William Hamilton), who I thought was being a little too harsh on the hon. Member involved. This underlines the point that my hon. Friend the Member for Fife, West, in defending the hon. Member concerned, was very clearly disagreeing with much that had happened. Therefore, it is scandalous that the hon. Gentleman should impute motives to my hon. Friend which do not exist. Such a speech should never be made in this House about another hon. Member.

Mr. Kenneth Lewis: The hon. Gentleman can give it in politics; I hope he can take it, too. I resigned from a Committee because I disagreed strongly with the hon. Member for Fife, West (Mr. William Hamilton), and I still feel very strongly about it. I simply emphasised in my speech, and I repeat it now, that on this Committee confidentiality is necessary.

Mr. Heifer: No one is disagreeing with the hon. Member's right to come forward in this House to argue his point of view and to object to any other hon. Member. But the suggestion was that my hon. Friend the Member for Fife, West would not honour confidentiality and would give information away while the Committee was in progress and without the Committee's permission. That is a scandalous suggestion and misrepresents what happened previously.
This is a free House of Commons because Members of Parliament at a certain stage of history decided to oppose the Monarchy—in fact, decided to cut one monarch's head off. But for that we should not have a free House of Commons now. We might as well pack up as a House of Commons if we ever reach the stage where we cannot criticise the Monarchy or question the income of the Monarchy for which we are responsible. The whole basis of our parliamentary system was built on republicans fighting for the rights of the people against the Monarchy.

5.0 p.m.

Mr. Atkinson: The hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) has been answered, so I will confine my comments to the closing remarks of the Chancellor of the Exchequer, which make it more than ever necessary for my hon. Friend to be included on the Committee. The Chancellor of the Exchequer's remarks were tantamount to an instruction to the Committee that it would not be within the terms of reference of the Committee to deal with the private income of the Royal Household.
It is because of the necessity to make a separation between the private income of the Royal Household and the private lives of the Royal Family, who are doing a public duty and being paid for it by the State, so as to get a fair tax arrangement that this matter should be debated

as widely as possible. The Select Committee should therefore have the right to look into the private income and the tax arrangements.
It is not right for the Chancellor of the Exchequer to advise the House that the Select Committee will not go into these matters and will not have access to the papers. If tax concessions are granted by the nation to the Royal Family, the Committee must have access to this information, and from that point of view the House should insist on my hon. Friend the Member for Fife, West (Mr. William Hamilton) being a member of the Committee, so that he can express the points which he has made so well to the House over many years.

Mr. John Boyd-Carpenter: As one of the only four Members whom the House has so far appointed to the Committee, I express the hope that my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis) will not press his objection to the hon. Member for Fife, West (Mr. William Hamilton). The Committee, as my right hon. Friend the Chancellor of the Exchequer said, has in this day and age a difficult and delicate job to do, and it is important that it should be, and be seen to be, representative of all currents and colours of opinion in the House and in the country.
I happen to dislike the views of the hon. Member for Fife, West on the Monarchy almost as intensely as I am sure he dislikes mine, but it is important that those who hold my view and those who hold his view should be together on the Committee. The fact that the hon. Gentleman holds a view which is held only by a small minority, even on his side of the House, is all the more reason for his inclusion on the Committee. As Voltaire said, I say to the hon. Gentleman:
I disapprove of what you say, but I will defend to the death your right to say it.
On the hon. Gentleman's personal position, I aim entitled to add one comment from experience. He was Chairman of the Estimates Committee in the last Parliament when I was Chairman of the Public Accounts Committee, and I am in a good position, therefore, to say, if I may do so without impertinence, that the hon. Gentleman was a very fine and wholly reliable Chairman of the Estimates


Committee, and he is well qualified in his personal capacity to serve on this or any other Select Commitee. The hon. Gentleman is a most reasonable man, used to hearing evidence. It may be that his experience on this Select Committee will prove highly educational.

Mr. Will Griffiths: Like the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), I, too, have served on the Estimates Committee under the Chairmanship of my hon. Friend the Member for Fife, West (Mr. William Hamilton) and I endorse everything the right hon. Gentleman has said about his chairmanship. Far from being likely to be in breach of confidence, my hon. Friend showed excessive regard for security.
No one who served under my hon. Friend on that Committee could possibly endorse the sentiments expressed in the rather nasty speech of the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis). I am sure my hon. Friend is not in the least worried about what the hon. Gentleman said, because two of the characteristics which were attributed to my hon. Friend are strong recommendations for his being on the Committee.
I endorse what has been said by my hon. and learned Friend the Member for Northampton (Mr. Paget) and my hon. Friend the Member for Tottenham (Mr. Atkinson). Before the debate is concluded, there is an obligation upon the Chancellor of the Exchequer to clarify what he meant in his last few sentences. I should like to know whether the precedents he spoke of are generally accepted by the House. They may be accepted by both Front Benches, but they do not express the point of view of many back benchers, at least on this side of the House. When my hon. Friend the Member for Fife, West joins his colleagues on the Committee, I do not want him to be in the position whereby, if the interpretation of the prospective Chairman's remarks is accepted by the Committee as being—

Mr. Speaker: Order. This is not a matter for the House. The Motion before the House is to set up a Select Committee to consider the Civil List and other matters connected therewith. This interpretation of the terms of reference is a

matter for the Select Committee, and, with great respect, whatever the right hon. Gentleman may say this afternoon on that matter will not bind the Select Committee.

Mr. Griffiths: I will conclude in a moment or two. We are discussing the objection of the hon. Member for Rutland and Stamford to the appointment to the Select Committee of my hon. Friend the Member for Fife, West. I am advancing not only the reasons why I think that my hon. Friend should be on the Committee but also my apprehensions of the inhibiting effect upon his activities if the last words of the Chancellor's speech are to be interpreted by the Select Committee and the House in a way which would inhibit my hon. Friend or any other member of the Committee—

Mr. Speaker: Order. With respect to the hon. Member, he is entirely in order in dealing with the qualifications of the hon. Member for Fife, West (Mr. William Hamilton) but he is out of order when he talks of the terms of reference which it is for the Select Committee to interpret.

Mr. Griffiths: In that case, Mr. Speaker, in view of your Ruling, I conclude by saying that I hope that the members of the Select Committee will take note of what has been said in the debate. I have no doubt that my hon. Friend, when he gets on to the Committee, will seek to see that his colleagues have a wide-ranging investigation.

Question, That Mr. W. W. Hamilton be a member of the Committee, put and agreed to.

Ordered,
That Mr. Joel Barnett, Mr. Boyd-Carpenter, Mr. Chancellor of the Exchequer, Mr. Chichester-Clarke, Mrs. Peggy Fenner, Mr. W. W. Hamilton. Mr. Douglas Houghton, Mr. Roy Jenkins, Miss Joan Lestor, Sir Fitzroy Maclean, Mr. Charles Pannell, Mr. Norman St. John-Stevas, Mr. John Stradling Thomas, Mr. Jeremy Thorpe, Mr. Turton, Mr. William Whitelaw and Mr. Harold Wilson be Members of the Committee.

Ordered,
That the Committee have power to examine all witnesses who voluntarily appear before them, and to report to the House their observations on the matters referred to their consideration.

Ordered,
That Five be the Quorum of the Committee. —[The Chancellor of the Exchequer.]

Orders of the Day — FINANCE BILL

Clauses 6 to 8, 10, 22, 30 and 49 and new Clauses relating to purchase tax.

Considered in Committee [Progress 18th May].

[Miss HARVIE ANDERSON in the Chair]

Clause 49

ABOLITION OF CHARGE TO CAPITAL GAINS TAX ON DEATH, ETC.

5.12 p.m.

Mr. Piers Dixon: I beg to move Amendment No. 19, in page 45, line 42, at end add:
(3) Where, by virtue of subsection (3) of section 25 of the Finance Act 1965, the assets forming part of any settled property are deemed to be disposed of and reacquired by the trustee on the occasion occurring after 30th March, 1971 when a person becomes absolutely entitled thereto as against the trustee, then, if that occasion is an event other than the termination of a life interest (within the meaning of that section) by the death of the person entitled to that interest, there shall be substituted for the consideration equal to the market value of the said assets a consideration such as to secure that neither a gain nor a loss accrues to the trustee.
(4) Where the last preceding subsection of this section applies then in relation to a subsequent disposal of the asset the person making the disposal shall be treated for the purposes of Part II of Schedule 6 to the Finance Act, 1965 as if the trustee's acquisition or provision of the asset had been his or her acquisition or provision of it.
(5) Section 25(4) of the Finance Act, 1965 (termination of a life interest in settled property treated as disposal by trustee) shall not apply in relation to any termination of a life interest occurring after 30th March, 1971 otherwise than by reason of the death of the person entitled to that interest.
Most of my hon. Friends have been very pleased by the provisions which have been introduced by the Clause, which has gone a long way to removing a number of anomalies involved in deemed disposals. But many of us think that there are still anomalies which continue to exist and could cause really quite unreasonable and capricious examples of unfairness.
I should like to give the Committee a number of examples. For example, a

small businessman may have a business worth, say, £20,000. He may die and leave his business to his two sons, one aged 25 and one aged 15, in equal parts, one half to his older son absolutely and the other half to his younger son, through trustees to which the younger son would be entitled absolutely on reaching the age of 21. Let us suppose that the two sons work industriously and vigorously and that by the time the younger son reaches the age of majority the business is then worth £40,000. The younger son, at this point, becomes absolutely entitled to his half share, but he discovers, to his horror, that he has to pay £3,000 to the taxman, and what he thought was worth £20,000 is worth only £17,000. Meanwhile, the older brother goes merrily along with a share which is worth £20,000. I ask the Committee whether this purely capricious arrangement is fair.
Another example would be that of a man who again left £20,000 in investments to his two schoolgirl daughters. He leaves his investments to his trustees, with the power of appointment. In the fullness of time, both girls grow up. The older sister marries a ne'er-do-well spendthrift, and the trustees quite properly decide not to give the older daughter any money but to keep it firmly in their hands. In due course the younger daughter marries a fine, upstanding man, and the trustees have no hesitation in handing over her share to her directly. The money has appreciated—it has been well invested—from £20,000 to £40,000. But the younger girl discovers, to her horror, that she does not receive £20,000 but has to pay capital gains tax and that she and her husband have to be satisfied with the income from £17,000. Meanwhile, her prodigal sister and prodigal brother-in-law continue to live off the income of £20,000. I ask the Committee whether this also is a fair distinction. It is a purely capricious distinction.

Mr. R. T. Paget: If the younger daughter did not want the money, would not the simplest method be to ask the trustees to treat her in the same way as the older sister and retain it for her?

Mr. Dixon: If I were the younger daughter's professional adviser—which I


should not be—I would strongly counsel her to do just that. But we are not here to advise citizens how to conform to the capricious behaviour of the law as it is; we are here to try to change the law while we can in order that it should be sensible and consistent.
One final example: there may be a man who leaves, say, £10,000 to his widow during her lifetime and then absolutely to his children, but he may also make a perfectly reasonable provision that if his widow marries again the investments should go absolutely to the children. The money continues to appreciate, but here, incongruously, the more his investments appreciate after his death, the less willingly and less eagerly do his children welcome the possibility of their mother marrying again, and the less willingly do they look forward to the prospect of a step-father joining the family group. Supposing that the investments appreciate from £10,000 to £20,000, at the point where their mother marries again that £20,000 is worth only £17,000. if the mother does not marry again the children will eventually have the full £20,000.
That is not fair and is not conducive to good family relations. If there is an actual disposal of assets, I should be the first person to agree that 70 per cent. of the profits are available actually to be spent; indeed, in certain cases, that money may be spent on riotous living. But in the case of a deemed disposal, no such thing arises, and the beneficiaries continue to have to live strictly within their income.
Under an actual disposal, 30 per cent. of the proceeds are immediately available in cash to answer the demands of the taxman, but under a deemed disposal the wretched beneficiary who has received no cash suddenly has to find some cash. Frequently, in the case of family businesses in particular, it will be difficult to realise that cash. It will often have to be done at a moment when it may not suit the business to realise assets. Other assets may have to be sold, and this will in turn give rise to further capital gains and further capital gains tax. It is with these considerations in mind that I commend the Amendment to the House.

Mr. J. Bruce-Gardyne: I support my hon. Friend the Member for Truro (Mr. Dixon). There can be no defence for the principle of deemed disposal, the basis of which is that tax is charged where no disposal has occurred. We on this side strongly welcome the Government's attempt in this Clause to get rid of this principle. No one should imagine that we are carping at these substantial mercies, but there are still one or two anomalies. I should like to think that the Government could accept the Amendments and get rid altogether of the totally unjustifiable imposition of the deemed disposal introduced by the last Government.
When my hon. Friend mentioned the problem of the estate left in trust to a wife and, on her remarriage, absolutely to the children, I recalled the arguments in another place about the way in which the courts sometimes try to assess a wife's value for remarriage. There has been a great deal of contention about this. I hope that the Amendments could avoid introducing a new element of discrimination when a widow remarries.
I am particularly concerned about the impact of deemed disposals on family companies because of the vital importance of those companies in the economy of areas like Scotland. There is no doubt—this point can be developed on the Question, "That the Clause stand part of the Bill"—that for the family company whose assets cannot easily be realised, deemed disposals create severe problems and may even lead to the forced sale of the company and its absorption into a larger unit.
With the Amendments, we should see the last of this iniquitous imposition coming at the time of death. The United States, which has had a capital gains tax for some time, has never gone to the absurd and unjustifiable lengths of imposing a system of deemed disposals such as the last Government introduced. I should like us to get rid of it altogether.

Mr. Tam Dalyell: Doubtless we could have a very revealing debate on the family company and the Scottish economy, from which it might emerge that many of Scotland's economic problems are related to this complex and interesting subject. But that is not the point of my intervention.
In our constituency work there arise very complicated questions of settlements as a result of remarriage. I have had to write to the Treasury on three such cases in eight years. Are the Treasury Ministers satisfied that the law in the whole complex of situations surrounding the conditions attached to remarriage is satisfactory? Does it not give the Inland Revenue an absolutely inordinate amount of work? Is this one of the parts of our tax system where there is less than the equity which we normally associate with the British tax system? It may be difficult to answer this question immediately, but perhaps it could be answered in writing or at the convenience of Treasury Ministers. It is a substantial point.

Mr. Peter Hordern: How much will it cost to tidy up all these deemed disposals to which the Amendment applies? I agree with everything said by my hon. Friend the Member for Truro (Mr. Dixon) and the cogent examples he gave.
This Clause is wholly admirable. We felt strongly about the imposition of capital gains tax as well as death duties on death, and voted strongly against this proposition when it was introduced in 1965. Thankfully, the Clause puts this right; but we also felt strongly against the whole principle of deemed disposals. I am glad that the Clause also abolishes the disgraceful artificial valuation of estates at 15-year intervals.
But, that principle having been rejected, and because of the known dislike of the Conservative Party for the monstrous principle of deemed disposals, should not this Amendment be accepted, and more tidying up done, to make it clear not only that we do not accept the principle but that capital gains tax should not apply unless a disposal has taken place?

The Financial Secretary to the Treasury (Mr. Patrick Jenkin): My hon. Friend the Member for Truro (Mr. Dixon) moved the Amendment in his customary modest and reasonable way, and I will try to respond in kind. To clear up one misapprehension, it would, of course, have been possible for the last Administration to introduce a tax which attached only when there was an actual disposal for cash. Instead, they introduced a tax which attaches to property and imposes a

charge in much wider circumstances—not just when there is a disposal for cash nut when there is a disposal.
For instance—this has not been mentioned today—the tax attaches when there is a gift, a disposal without consideration. If the logic of some of the arguments of my hon. Friends were to be followed through, clearly it would extend equally to a disposal by way of gift. This would follow.

5.30 p.m.

One is entitled, on the footing that the tax is a tax on disposals, to have regard to the changes of ownership and in the nature of ownership that take place. For example, when a contingent interest becomes vested or when there is a movement of property under a settlement, as in the third case cited by my hon. Friend the Member for Truro, of the widow who remarried, one may regard that as a disposal, admittedly not for cash, within the general pattern of the tax as it stands.

The Clause was aimed at one particular form of deemed disposal; namely, disposal where there is a concurrent or related charge to estate duty. I remind the Committee of what my right hon. Friend the Chancellor of the Exchequer said in his Budget Statement:
To impose this charge on an occasion when the estate, including the accrued gains, is already being charged to estate duty at rates which rise to 80 per cent. results, in my view, in an altogether excessive burden."—[OFFICIAL REPORT, 30th March, 1971; Vol. 814, c. 1379–80.]
For this reason Clause 49 is designedly confined to that range of cases—it is probably true to say that it covers substantially most of the deemed disposals —where there is this concurrent or related charge to estate duty.

As my hon. Friends who have spoken on this issue have pointed out, the Amendment would move the exemption well beyond that, and although there are arguments which can legitimately be advanced in its favour, which is what my hon. Friends have done, the Amendment would go beyond what my right hon. Friend felt was appropriate and necessary in this Budget.

Mr. Joel Barnett: When the hon. Gentleman says that the Amendment would go beyond what his right hon. Friend wants to do in this Budget, may I ask him to say


whether his right hon. Friend is accepting the principle that disposal should be for cash in capital gains tax terms and that he is, therefore, accepting the basic argument presented by his hon. Friends?

Mr. Jenkin: I shall be coming to that later. When we come to the Question "That the Clause stand part of the Bill" I will comment on the Government's attitude towards this whole issue. At this point I am merely saying that in this Budget the relief which we have introduced in this sphere is the one which seemed to us to have the highest priority; namely, the case where the charge to capital gains tax is concurrent with or related to a charge to estate duty on the same property.
My hon. Friend the Member for Truro suggested that the results were capricious. In any reasonably complicated tax system such as ours, it is inevitable that quite minor differences in the treatment of property and in the arrangements which taxpayers may make for their affairs will give rise to differences in their tax treatment. Speaking generally, one would not wish this to happen, unless there were, as it were, justifiable reasons for such a difference in treatment.
For example, in the case of a settlement on an infant where the infant is absolutely entitled, which is a completely bare trust, there is no change in the nature of that infant's ownership of the asset when he comes of age, and capital gains tax does not attach. It is where the contingent interest becomes vested—the first example my hon. Friend gave—that on the present pattern of the tax the tax attaches, because there is a change in the nature of the ownership.
I advance this argument not because I place a great deal of weight on it but because it is fair to point it out, that people will dispose of assets in that form partly with a view to avoiding possible liability to estate duty. Supposing the infant dies before coming of age. If it is a contingent interest ended before it ever vests in possession, no estate duty attaches. One is not, therefore, entitled to say that these results are highly capricious because they turn out to be different, simply because the trusts, relationships and so on are different. Where it is a bare trust, there is no deemed disposal and no attachment.
My hon. Friend the Member for Horsham (Mr. Hordern) asked me to give the cost of meeting the Amendment. I asked the same question and was told that it was not possible to give an estimate of the cost but that it would be likely to be significant. I ask the Committee to bear in mind that the relief which Clause 49 already gives is nothing in 1971–72, because it is matched by the increase in estate duty, but is estimated to amount net in a full year, after taking account of the increase in estate duty, to £15 million. This is significant and represents a modest first step in the reform of capital gains tax to which we were committed when we came to office.

Mr. Barnett: Will the hon. Gentleman give an estimate of the future likely cost of the Clause? He referred to £15 million. What will it cost in future years?

Mr. Jenkin: I could not answer that without notice. However, I will seek the information, and if I get it before the end of the debate I will give it to the hon. Gentleman.
I emphasise that the figure of £15 million is the net cost. If one were to take the gross cost, without allowing for the estate duty exemption, it would, of course, be substantially more. Indeed, it would be £25 million, but there is the extra £10 million of estate duty. In relation to the reliefs given in direct and personal taxation in the Budget, I think the Committee might feel disposed to agree that this represents a reasonable first step.
The hon. Member for Heywood and Royton (Mr. Barnett) asked me to state our attitude to the principle on which the tax is based. I may be able to explore this more fully on the Question "That the Clause stand part of the Bill". At this point I content myself with saying that before the election we undertook to review capital gains tax. We have concentrated in the first seven to 10 months in office on embarking on major reforms in personal, company and indirect taxation. We have made what the Committee may regard as a reasonable first step, by eliminating some of the grosser anomalies in capital gains tax.

Mr. Bruce-Gardyne: My hon. Friend says with justification that the Government have made a reasonable first step in this direction. In contemplating future steps, will the Government look


with favour on the American example of a capital gains tax which arises only on disposals of cash?

Mr. Jenkin: I think I would be wise to say no more than what I was about to say, which is that we are continuing our review of the whole system of taxation. There are obviously many areas that require careful study and, perhaps, reform. In carrying out this review, my colleagues in the Treasury will, as they have always said, not exclude anything. We are prepared to look at any precedents, patterns and systems of taxation in any other countries which may have something to teach us.
I see the argument that if one takes deemed disposals as a group, there does not seem to be a great deal of difference in principle between the deemed disposals dealt with in the Bill and the deemed disposals mentioned by my hon. Friends. But if one takes the particular argument which my right hon. Friend advanced in his Budget Statement for limiting the relief at this stage to this case, where there is a concurrent or related estate duty charge, it manifestly does not apply to the class of deemed disposables covered by the Amendment, and it could make a significant addition to the relief we have given.
Of course, the Government are very sensible of the need to make sure that the tax system should not press disproportionately hard on family businesses. Indeed, it may be thought that we have already made a number of quite significant changes. I have no doubt that the Committee has already taken note of an important Amendment, which my hon. Friend the Chief Secretary to the Treasury has tabled for the Committee upstairs, in relation to estate duty. But I am entitled to say of this Amendment that there is already in the law—in Schedule 10(4) of the Finance Act, 1965 —provision for some relief against the possible consequences which my hon. Friend envisaged in the event of a sale of shares in a privately-owned company. Circumstances are spelt out in that provision in which the liability to capital gains tax may be spread over a period of up to eight years in order to avoid the sort of hardships and difficulties which my hon. Friend has in mind. It may be that we shall want at some stage to look at that, but some provision is there already.
If I were asked to sum up in a sentence my attitude to the Amendment, I would say that it is one that I would not be prepared to resist to the last ditch, but that at this stage, in this year, and bearing in mind the relief we have already given and the rationale for confining relief at this stage to cases involving a concurrent estate duty charge and that we are committed to a continuing review of the whole tax system, not least capital gains tax, I hope that my hon. Friend will feel it right not to press the Amendment to a Division.

Mr. John Boyd-Carpenter: Since it is the normal role of Financial Secretaries to resist innumerable Amendments to the last ditch, I suppose the fact that my hon. Friend excludes the last ditch on this occasion may be some encouragement.
As I understand my hon. Friend's argument, it is that as a first step—I think he used that expression on no fewer than three occasions—he desires to restrict the removal of tax to cases where estate duty falls. On the assumption that as a matter of construction a first step is always followed by at least a second step, I suppose that we can draw some measure of satisfaction from the tone of my hon. Friend's reply, but I want to put to him one or two points arising, even on his own principle.
If I understand my hon. Friend correctly, the Chancellor thinks that on this occasion, as a first step, there should be relief from capital gains tax where estate duty also falls. But how close in point of time must the falling of an estate duty liability be for this principle to operate? I have in mind a simple and fairly usual case of a man with two children who dies when one has attained his majority but the other is still a minor. The man leaves his estate to both. The elder child's portion of the estate will pass —subject, of course, to estate duty—to him under this Clause without capital gains tax falling, but the younger child's share will probably go into the hands of trustees, perhaps for quite a limited time, during the remainder of the minority.

5.45 p.m.

As I understand it, when the younger child comes of age and the trustees hand his portion over to him, there will be


liability to capital gains tax. If the minority is a prolonged one—where the younger child is aged only one or two —1 suppose that the principle of only giving the relief where estate duty has also fallen has some respectability as a result of the duration of time since the estate liability arose. But if the remaining minority is quite short—say, a year or 18 months—does it not fall within the principle and is it not unfair that whereas the elder child who, by sheer accident of time, is just of age when the father dies get the full relief of the Clause and pays no capital gains tax on his portion, the younger child, again through the accident of age, encounters a relatively slight delay while the property goes to trustees before coming to him, and thus becomes liable to capital gains tax?

This is a point which has only arisen because of the Government's concession in respect of death. It is, therefore, a new point. Apart from the general principle of there being no capital gains tax where there is no effective realisation, there is the more limited but quite important point that the Chancellor has himself created certain anomalies of this kind by the concession he has made. I appreciate that this is almost always the tiresome consequence of making concessions, and it is an argument which Treasury Ministers from time to time have adduced against making a concession at all. My hon. Friend may indeed fall back on that one. But I ask him to consider seriously whether this is not an unfair anomaly, and also the time factor between the death of the testator and the coming into possession of the minor, on attaining his majority, which, under the Clause as it stands, will exclude the liability to capital gains tax.

Mr. Martin McLaren: We can take a good deal of comfort and encouragement from the reasonable reply of my hon. Friend the Financial Secretary. I hope that in future years we shall be able to confine the tax to actual disposals made by way of sale and that we shall get rid of the whole business of deemed disposals, because where there is a deemed disposal the law is imputing a state of affairs which is otherwise than reality. That occurs in various places throughout the tax system, and wherever it occurs it brings the

system into unpopular and capricious waters. I hope that we shall get rid of all that.
I think it is true that the limited concession in the Clause will open the way to large anomalies unless the door is made wider. For instance, one may have a life tenant who may be such for about 50 years. In the event of his death, no capital gains tax will now be paid. On the other hand, one may have a settlement where there is no life tenant. Then, as the law stands, every 15 years the chopper remorselessly falls. That is not an equitable or fair situation. Now that the dyke has been breached, I hope that the flood will be made more generous, if not this year then next year.

Sir Tatton Brinton: Although it may be said by the Revenue that the concession for which we are asking would cost £10 million, £15 million, or whatever the estimate is for this year, and perhaps greater sums in later years, this is not a true cost. It is a deferment of the collection of the capital gains tax.
We are not asking for any removal of a capital gains liability. We are asking merely that it should not be collected until realisation. The base for capital gains tax would be carried forward in the hands of the new presumptive owner in the case of a gift or on a transfer from trustees, and the base would remain as it always was, so that on any ultimate disposal a greater sum of capital gains tax would be paid. The present system of deemed disposal merely collects the inbuilt element of capital gains tax contained in an asset at an earlier date before there is an actual final sale for cash.
In the light of that, it is most misleading to quote a one-year reduction in revenue, because it is deferred. We all know that the Revenue is always inclined to make the taxpayer pay up earlier in the case of capital gains tax. This tendency should be resisted. Payment should fall due on final disposal only. I stress again that there would be no ultimate loss of tax to the nation.

Mr. Patrick Jenkin: I entirely take the point made by my hon. Friend the Member for Kidderminster (Sir T. Brinton), that as the Amendment has been drafted it is a deferment of tax. However, there are certain categories of assets which on any reasonable balance of probability would never be disposed of for value, and it is


a question of judgment and of balancing the various claims upon the Exchequer and upon taxpayers before deciding whether one postpones, as it were, for ever any liability to capital gains tax.
To my hon. Friend the Member for Bristol, North-West (Mr. McLaren) I say —I say this with hesitation to an hon. Member who has been in the House of Commons for longer than I have—that it is not exactly an invitation to a Treasury Minister to make a small concession to be told that now that he has opened the dyke the breach must be widened and the flood must come pouring through. My right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) indicated that this was an argument which Treasury Minister were prone to put in resisting any concessions. My right hon. Friend the Chancellor has made a limited concession in the Budget, but it is one of some significance, and to go beyond it at this stage would be wrong.
I feel with some glee that we may have caught out my right hon. Friend the Member for Kingston-upon-Thames. We are talking about a capital gains tax. We are talking about a tax on gains realised at particular times. It follows that the exemption in the Clause is for gains that have accrued up to the date of a death. They are then charged to estate duty and we exempt them from capital gains. Any further gains that accrue after the date of the death, as in the example my right hon. Friend took, are not affected by the exemption we have given, because the effect of the exemption includes also a writing up of the value of the asset at the date of the death.
The logic of the concession which is embodied in the Clause is that those gains up to the point of death are taxed; they are subject to estate duty. My right hon. Friend made it clear that it was excessive that they should be charged to two taxes, that they should be subjected to a dual taxation. They have paid tax. Any further gains subject to tax, as in my right hon. Friend's example, start afresh. Even if the beneficiary disposes of the assets within a year it is entirely appropriate and in accordance with the principles of tax law that any gains between the date of the death and the

date of the disposal should be subject to capital gains.

Mr. Boyd-Carpenter: I do not think that my right hon. Friend has quite got the point. I was putting the case of the two beneficiaries, one of whom being of age obtains and continues, let us assume, to hold the property bequeathed, free in the meantime of capital gains. The other beneficiary, simply through the accident of the age that he or she is at the death of the testator, is kept out of the property for a year or two and therefore gets the property minus the capital gains which have accrued since the testator's death. Therefore, though the younger child may have been left precisely the same amount as the elder, through the purely capricious accident of age he gets a smaller bequest. This is an anomaly. If my hon. Friend were in that position I am sure that he would feel it.

Mr. Jenkin: I accept the case that my right hon. Friend is making now, but it is exactly the case which was made by my hon. Friend the Member for Truro (Mr. Dixon). I understood that my right hon. Friend was earlier attempting to justify dealing with that case by reference to the death which had immediately preceded it. I was concerned to say that the exemption in the Clause on that death relates to gains which have accrued up to the date of that death and it in no way relates to any gains which have accrued subsequently. Even if the disposal after the death takes place after one year, five years or 10 years, it does not seem to me to advance the argument to say that other gains were subject to another tax earlier on. I would find it very difficult to accept on that logic that we should extend the relief given in the Clause as suggested in the Amendment.
I hope that I have said enough to indicate the reasons why I hope that my hon. Friends will feel it right not to press the Amendment this year. I give an undertaking that we will study it in the course of our continuing review of the capital gains taxation. With that, perhaps my hon. Friend the Member for Truro will feel disposed not to press the Amendment.

Mr. Dixon: I am slightly disappointed by what my hon. Friend the Financial


Secretary has just said to us. In particular, I was not entirely impressed when he said that certain capricious situations might well arise under the proposed legislation, but, after all, there are many other capricious situations. I prefer to think that the rôle of hon. Members is to help Ministers to iron out some of these capricious situations.
However, my hon. Friend has in his remarks, particularly those about the future year, given many of us much comfort and much comfort to small businesses. Therefore, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question proposed, That the Clause stand part of the Bill.

[Sir ROBERT GRANT-FERRIS in the Chair.]

Mr. David Marquand: It is rather sad to have to move to a certain amount of controversy with the Financial Secretary from having been able to sit back and enjoy the skill with which he resisted his hon. Friends on the last Amendment. I am sorry to say that a certain amount of controversy is bound to arise in this debate.
On Second Reading the Chancellor of the Exchequer expressed the hope that when the Clause was considered he would have the support of the Opposition. I am sorry to have to tell the Chancellor—I do not suppose he will be particularly surprised to hear it—that we have now considered the Clause very carefully and the more we have considered it the more we dislike it.
Before stating the arguments which have led us to this conclusion, I want to put some questions to the Financial Secretary about the Government's assumptions regarding the Clause. On page 28 of the Financial Statement, the Government say that the net loss which this Clause will impose on the Revenue in a full year will be £15 million, and that this is to be made up of a fall in the yield of capital gains tax of £30 million—

6.0 p.m.

Mr. Patrick Jenkin: No, £25 million.

Mr. Marquand: Footnote (a) refers to £30 million and £15 million.

Mr. Jenkin: Perhaps I can help the hon. Gentleman. Inevitably, the Inland

Revenue has adjusted its estimates as further information has become available. I am advised that the right figures are £25 million, with a further £10 million for estate duty, and, therefore, a net loss of £15 million.

Mr. Marquand: I am obliged to the hon. Gentleman. The point which I ask him to elucidate is one which was raised briefly by my hon. Friend the Member for Heywood and Royton (Mr. Barnett), as to what exactly the Government mean by "a full year". Does it mean the next full year, or a full year later on? This is very important, because the whole nature of capital gains tax is such that the yield will build up over a longish period of time. The capital gains tax on individuals yielded £7·5 million in 1966–67 and, according to the Financial Statement, the yield in 1970–71 is £140 million. This is a substantial buildup since it was first introduced.
Obviously the build-up is likely to continue for a considerable period—at the very least, for the first 15 years—because the provisions regarding trusts will start to have effect only then, and in some cases there may be deferrals to a very much later date, so that the full effect of the 1965 provisions will not come into effect until 35 or 40 years after that date.
If the Committee is to appraise the significance of what the Government propose in this Clause, it is important to know how far ahead the Revenue's estimates of the cost go. I know that it is difficult for the hon. Gentleman to provide precise figures, for obvious reasons, but it would be helpful if we could have some idea of the Treasury's thinking on this matter.
In a way, my second question is even more important. In the United States it is generally assumed that, as a result of the fact that under American law capital gains tax is not charged at death, something like two-thirds of the total of capital gains which would otherwise be taxed escape taxation. The Government estimate that the loss of revenue from capital gains tax as a result of this Clause will be only £25 million obviously implies that they take a very different view. It seems to hon. Members on this side of the Committee that it is essential for the Government to explain why they take such a different view from that taken by the authorities in the United States.


It is essential, too, that we should be told what assumptions the Government are making about what is sometimes called the "locking in" effect of this provision.
The Financial Secretary will know that two successive Secretaries of the United States Treasury, neither exactly a bloody-handed Bolshevik—Secretary Douglas Dillon in 1963 and Secretary Henry Fowler in 1969—told the Congress that in their view the fact that capital gains tax is not charged at death has had a significant effect on the behaviour of elderly property owners.
In 1963 Secretary Dillon said:
Present law permits the exemption from income tax"—
under American law, of course, capital gains tax counts as income tax—
of capital gains accrued when the appreciated assets are transferred at death. The prospect of eventual tax-free transfer of accrued gains with a stepped-up basis equal to the new market value in the hands of heirs distorts investment choices and frequently results in complete immobility of investments of older persons.
Secretary Dillon, of course, was a pillar of financial orthodoxy in the United States.
One of his successors, Secretary Fowler, told the House Ways and Means Committee and the Senate Finance Committee in February, 1969:
When tax liability is allowed to depend on whether an appreciated asset is sold or kept until death, the tax law operates to produce undesirable economic effects, particularly in cases of older people. Assets become immobilised; investors become 'locked-in' by the prospect of avoiding income tax completely if they hold appreciated assets until death rather than selling them. This freezing of investment positions deprives the economy of the fruits of an unencumbered flow of capital toward areas of enterprise promising larger rewards.
One of the reasons why many American authorities have concluded that as much as two-thirds of the total capital gains which would otherwise be subject to tax in the United States escaped taxation because of the exemption at death is the result of this locking-in effect. If we are to judge the full effect of Clause 49 on the Revenue, it is essential to know what view Her Majesty's Government take about locking in by elderly people. When they forecast that the yield of capital gains tax will fall by only £25 million, are they assuming that the Clause will

have no effect on capital disposals by elderly people? If they are assuming that, what possible reason can they have for believing that British property owners will behave in such a markedly different fashion from their American counterparts? If they do not assume that, what possible value can their estimates have? It is essential to have some indication of the assumptions and thinking of the Government on this matter if we are to appraise the Clause in a sensible fashion.
I turn now to the arguments which I imagine will be produced in favour of the Clause and which support the proposition that for capital gains tax death should not count as a disposal.
I was not a Member of this House in the strenuous days of 1965. Perhaps it was good for my health that I was not. However, I have been reading the debates on the 1965 Finance Bill to discover the major arguments against deemed disposal on death. I think that I can guess which passages the Financial Secretary may have thought of quoting.
It appears that three main arguments have been advanced. The first is that to charge capital gains at death is inequitable because it is a form of double taxation, in the sense that the Revenue has both estate duty and capital gains tax. However, that argument involves a fundamental misconception of what capital gains tax is. Estate duty is levied on the estate as a whole, but capital gains tax is levied on the increase in spending power resulting from the appreciation of a capital asset. The two are quite different.
The Government can, if they wish, say that they do not want a capital gains tax at all. They can say that it is wrong to tax this form of increment in spending power for many reasons. There are powerful arguments for that view, which on balance I do not accept, but they can say that.
If the Government accept the proposition that capital gains ought to be taxed, it seems that in logic they cannot advance the argument that capital gains tax and estate duty comprise a form of double taxation, that if we are to have a capital gains tax it can only be to tax an increase in spending power and that this is different from the total worth of an estate.

Mr. Bruce-Gardyne: Is the hon. Gentleman trying to say that particular assets which fall to be taxed for estate duty and capital gains tax are, in some sense, different capital assets? If so, in what way?

Mr. Marquand: I am not saying that. Capital gains tax is not a tax on the capital asset as such; it is a tax on the difference between the worth of the asset when first acquired and its worth now. It is not the same as a tax on the total asset as such. If the hon. Gentleman cannot see this point, I am sorry for him. It is clear to me and, I think, to the Financial Secretary. If not, then in logic the Government would be abandoning the whole idea of the capital gains tax altogether.

Mr. Patrick Jenkin: The only person to whom it was not clear was the person who was to pay it.

Mr. Marquand: That may be.

Sir T. Brinton: Will the hon. Gentleman give way?

Mr. Marquand: No.

Sir T. Brinton: This is relevant to the hon. Gentleman's argument.

Mr. Marquand: It may be relevant, but it is difficult to deal schizophrenically with two different interventions at the same time. I had better deal first with what the Financial Secretary said about its not being clear to the individual who paid the tax. I shall be coming to the possible hardship which might be caused. My point is that there is a clear distinction in logic between the two different taxes.

Sir T. Brinton: I am grateful to the hon. Gentleman for giving way. I apologise for interrupting him again. I was going to agree with the point which he stressed several times. In dealing with the philosophy behind the capital gains tax the hon. Gentleman has three times used the expression "increment" or "increase in spending power". I am entirely in agreement; that is also my concept. But the corollary surely is that this spending power only becomes spending power if the asset is realised. In other words, the object of the capital gains tax—I was glad to hear him almost admit it—was

to get at assets which were realised at a profit and the proceeds used for other purposes. When the asset is preserved as a saving and not realised, there is obviously no increment in spending power.

Mr. Marquand: The burden of the hon. Gentleman's remarks is that we should not count death as a disposal. I shall come to that fundamental argument later. If he will bear with me, I will not answer that point now.
The second ground advanced during the debates in 1965, which was also put forward, at least by implication, by the Chancellor when he spoke about this matter either in his Budget Statement or on Second Reading, was that of hardship, that the combination of capital gains tax and estate duty coming at the same time caused a great deal of hardship to individuals and particularly to small businesses. I necessarily take the hardship argument seriously. However, it is important to point out that in 1965 the Government tried to go some way to meet that argument. It may be that they did not go far enough. I am not saying that they did. However, it seems a dangerous proposition to say that because of the hardship argument we must destroy one of the fundamental pillars on which the capital gains tax is based rather than try to deal with hardship in other ways. This is the central point in that connection.
6.15 p.m.
A third reason was advanced by the Financial Secretary not in the 1965 debates but more recently in the Budget debate on 1st April, when he seemed to be implying that a reason for eliminating deemed disposal on death was that the capital gains tax, as it now works, is a tax on inflation. Perhaps I should remind the hon. Gentleman of his remarks on that occasion. He said:
We have been pressed over the past few months to provide a taper for capital gains tax to prevent it being a tax on inflation. I do not think that it has been generally appreciated that ending the deemed disposal on death goes part of the way to meet that case…In that way we can claim to have met at least in part the criticism of the tax which has been widely voiced."—[OFFICIAL REPORT, 1st April, 1971; Vol. 814, c. 1697.]
That is a very dangerous argument for the Financial Secretary to use. If the argument about deemed disposal on death


is valid, then it is valid about the capital gains tax. If the Government are saying that the paper appreciation in capital values which has taken place is not the real appreciation and it is therefore wrong and inequitable to tax the paper appreciation because this is merely the result of inflation, then that argument applies to capital gains tax. Therefore, to introduce the argument as a justification for eliminating the deemed disposal seems to be opening the door to pressure on the Government from their back benchers eventually to eliminate the capital gains tax altogether. That argument is not valid in any case.
It is true that inflation can mean that paper capital gains are larger than real capital gains; but the same is true of earned or any other income. If the Government are saying that taxation ought not to be levied on increases in income which result from inflation and do not represent real gains, it seems that what we have now will be somewhat different from the Budget which was announced.
I turn to the argument against the Clause and in favour of retaining the deemed disposal on death. The fundamental point is that deemed disposal on death is an integral part of an effective capital gains tax and that without it capital gains tax will be much less likely to achieve the aims for which it was designed.
In our view the capital gains tax is designed to serve two major purposes. First, it is designed to create greater equity between one taxpayer and another. As I said before—the hon. Member for Kidderminster (Sir T. Brinton) reminded me that I had said it several times, so I feel a little apologetic for saying it again—in our view capital gains represent an increase in spending power as much as income does and, therefore, they ought to be taxed for that reason. It is inequitable to levy taxation on those who increase their spending power as a result of income and not to tax those who increase their spending power as a result of capital gains. That is why the United States has had taxation of capital gains in one form or another ever since the federal income tax was introduced; it has always regarded capital gains as being a form of income.
Second, we believe as a matter of principle in the redistribution of wealth and

income in our society. Capital gains bulk very much larger in the incomes of wealth people than in the incomes of those lower down the scale. There can be no dispute about that. If we fail to tax capital gains, we are discriminating heavily in favour of wealthy members of society.
Why does the removal of deemed disposal on death interfere with those aims? I have already mentioned that in the view of many competent authorities in the United States about two-thirds of capital gains escape taxation via that route, which is being introduced into the Bill. The result is to lower the effective rate of tax on capital gains to around 10 per cent. instead of the figure of over 30 per cent. which it is theoretically.
I have quoted Secretary Fowler once, but it is worth quoting him again. This is what he told the House Ways and Means Committee and the Senate Committee on Finance in 1969:
It is apparent that the present system of not taxing appreciation on assets transferred at death has serious defects:
The present system is grossly inequitable and substantially impairs the progressivity of the tax structure.
At least $15 billion a year of capital gains fall completely outside the income tax system.
The Government may say that that will not happen here, but if they are to persuade us of that it is up to them to demonstrate why.
If the Clause is passed, the situation which American tax reformers have deplored, and which two successive American Administrations have tried to change, will be created in this country. The "lock-in" effect will be produced here, with resulting ill effects on the capital market. That is an argument which should appeal to Conservative hon. Members. Since the heir to a capital asset will he deemed to have acquired it at its value when he inherited it, the appreciation between its original acquisition and the death will never be taxed, even if the heir later disposes of it. There can be no doubt that it will mean that in many cases capital gains will in effect be handed down from generation to generation and escape taxation altogether.

Mr. Cecil Parkinson: Is the hon. Gentleman taking into account estate duty? Only if estate duty is paid will the exemption be available. In other


words, there is a capital levy on death, but the hon. Gentleman seems to be ignoring it.

Mr. Marquand: I do not want to retrace my steps that far back in the argument. I have tried to deal with the point about estate duty. I put forward the argument which I think the Financial Secretary implicitly accepted for himself, even if not as far as the taxpayer is concerned, that estate duty and capital gains tax are levied on different things. Therefore, the hon. Gentleman's intervention does not apply.
The Clause will produce a situation that is inequitable as between individuals and unjust as between social classes. Therefore, I urge my hon. Friends to register their opposition to it in the Lobby.
I go further than that. An Opposition should always think twice before committing themselves to repeal legislation introduced by the Government of the day. In this case, we have considered the advantages and disadvantages of making such a commitment very carefully, and have come to the conclusion that, to give fair warning about the policy of a future Labour Government, it is right to make clear now that when we return to power we shall repeal the Clause and restore the integrity of the tax. As to the charge of capital gains tax on death and the associated provisions with regard to trusts, we shall restore the position to what it would have been if this Bill had never been introduced.

Mr. Bruce-Gardyne: I listened with great interest to the hon. Member for Ashfield (Mr. Marquand). If he were a magistrate, I would not much like to come up before him for speeding where there was a 30 m.p.h. limit, because he would say, "I shall fine you £5 for exceeding the 30 m.p.h. limit, and as that limit subsumes the 40 m.p.h. limit, and you were driving at 50 m.p.h., I shall fine you another £5 for going at more than 40 m.p.h." I would not find that equitable or acceptable. That, it seems to me, was the hon. Gentleman's basic argument in trying to pretend that capital gains tax levied on top of the incidence of death duty was not double taxation of the same assets. As my hon. Friend the Financial Secretary said, it certainly must feel that

way to the individual who suffers from it.
I was interested to hear why the Opposition chose to debate the Clause on the floor of the House, and to hear all their arguments for voting against it. At one point I thought that we would have the remarkable spectacle of the Opposition marching into the Lobbies against the Clause on the ground that it would inhibit the unencumbered flow of funds to companies promising larger rewards. That would have been the day, particularly after the Opposition's efforts in opposing Clause 22, and the possibility outlined there of encouraging the movement of assets to companies that could use them more effectively by reducing the element of discrimination against investment income.
I was also very interested in the way in which the hon. Gentleman kept harping back to the United States. At one point he said that the United States had had a capital gains tax for years. Indeed, it has, and, it is also very careful never to have made the provisions which the Clause is designed to remove from the tax.

Mr. Marquand: Two Administrations, the Johnson Administration and the Kennedy Administration, both of which I should have thought the hon. Gentleman would regard as being less than bloody Bolsheviks, have sought to do exactly what the Clause undoes for us.

Mr. Bruce-Gardyne: Yes, and Congress in its wisdom always prevented them from doing so, as I am sure the Committee tonight will prevent the hon. Gentleman doing what he wants to do. I was depressed to hear him commit his party to repealing at least part of the Clause. I listened carefully, and I gathered that he was not committing it to repeal the 15-year provision.

Mr. Marquand: I did say, "…together with the associated provisions regarding trusts." That covers that point.

Mr. Bruce-Gardyne: That only makes the position worse. I was depressed to hear that, because I wonder whether the Opposition have appreciated the impact which the provisions which the Clause is designed to repeal have had, and are having, on family companies. That is the particular burden to which I want to refer briefly this evening.
6.30 p.m.
My right hon. Friend the Chancellor made the case very clearly in his Budget Statement, when he said:
To impose this charge"—
that is the charge to capital gains tax on death—
on an occasion when the estate, including the accrued gains, is already being charged to estate duty at rates which rise to 80 per cent. results, in my view, in an altogether excessive burden, and this can cause particular difficulties for family companies."—[OFFICIAL REPORT, 30th March, 1971; Vol. 814, c. 1379–80.]
I am particularly concerned about this, because I believe that the damage which this sort of legislation has done to family companies has been particularly deleterious in areas like Scotland, and I want to explain briefly why I hold that view.
The effect of capital gains tax impositions on top of extremely onerous estate duty tax and the effect of the 15-year disposal rule, on family companies, where the assets are not easily marketable or realisable, can be fairly catastrophic, and the direct effect is that in so many cases it has forced family companies to sell out to larger concerns which can offer them a marketable equity. The trouble about that is that the larger concern is often a United Kingdom-based group—probably based in London—which, as we have seen all too often in recent months, may take very little notice of the subsidiary which it has acquired under those circumstances, which used to have profound local roots in areas like Scotland.
Those who are concerned, as some of us are, about the way in which areas like Scotland are in danger of becoming what have been described as branch factory economies, should view with particular alarm undertakings by the Labour Party to encourage further the disappearance of the only type of companies that are likely to have profound local roots, with research and development and management on the spot in Scotland. I hope that the hon. Member for West Lothian (Mr. Dalyell) and his hon. Friends from Scotland will appreciate that when they go into the Lobby tonight to vote in favour of the clear undertaking given by the hon. Member for Ashfield to reverse the provisions which are designed to diminish the damage to family companies, they are voting, in effect, for the extension of a branch factory economy

in areas like Scotland, and the destruction of local management with local research and development facilities. I hope that the activities of hon. Gentlemen opposite will be appreciated in areas like Scotland where so much damage has already been done by this kind of Clause.

Mr. Michael Meacher: I believe that my hon. Friend the Member for Ashfield (Mr. Marquand) has dealt ably with the question of tax gains accruing to the rich as a result of this Clause. Although that is obviously a main aspect of the Clause, the amount of revenue forgone as a result of this tax concession is by no means the only issue raised, and I wish to dwell on another aspect of it.
That is particularly the case since these charges to capital gains tax imposed under Section 25 of the 1965 Finance Act and now proposed for repeal, were so easily avoided. The treating of the end of certain 15-year periods as the termination of life interest in settled property was easily avoided as a result of taking out a life interest just prior to the date by paying an annuity to one of the beneficiaries. Under Section 10 of the 1966 Finance Act an annuitant is regarded as a life tenant. Once the precise date concluding a 15-year period was safely passed, the payment of the annuity could immediately be stopped.
Similarly, the charge to capital gains tax was never particularly onerous because, under Section 26 of the 1965 Finance Act, it was stipulated that it was treatable as a debt to the estate, so that even the estate which was subject to the top marginal rate of 80 per cent. was still entitled to a remission of four-fifths of the charge.
But even if the amount of revenue forgone as a result of this tax concession is not a prime consideration, at least in the short-term, there are two matters which are of prime importance.
The first is the Government's attitude to discretionary trusts. Is it the Government's view that discretionary trusts should be given a free rein to drive a horse and carriage through the estate duty regulations? I accept that is well recognised that discretionary trusts in feudal times, when based on the tenure of freehold land, had a proper function, but now that the principal assets are entirely stocks and shares, the prime object of


the settlor, in almost every case, is a diminution of the incidence of taxation on the income of beneficiaries, and on the estate as a whole or on its transmission on the death of the settlor.
Apart from the anti-avoidance legislation in the 1969 Act, virtually the only other main limitation on the permanent exclusion of family settlements from liability to estate duty are laid down by the generous perpetuity periods provided under the Perpetuities and Accumulations Act of 1964. Almost certainly, however, if the trustees know what they are doing the capital will have been distributed well before that, and it is able to embark on a new lease of life entirely free of estate duty, and subject only to the 7-year rule risk, but subject only to that.
In order to assist the disappearance of large amounts of capital from the attentions of the estate duty office, the courts have been equally obliging. Where a settlement has been drafted in an imprudent manner, or where its tax saving clauses have been overtaken by subsequent anti-avoidance legislation, steps can be taken to vary the trust deed. It is true that in the case of infants, or unascertained beneficiaries, an application must be made to the courts, and that can be made under the Variation of Trusts Act, but the use to which this Act has been put is almost entirely one of tax avoidance, and there is virtually no court decision in recent times, with one exception, when an application to vary the trust has been refused on the ground that its object was tax avoidance.
The Government may take the view, and I have heard the Financial Secretary express it, that tax avoidance is acceptable provided it keeps within the law.

Sir Gerald Nabarro: Hear, hear. That is what the law is for.

Mr. Meacher: I shall come to that. I submit very firmly that—

Mr. Patrick Jenkin: The hon. Gentleman has purported to quote me. If he is going to put words into my mouth, he must quote exactly what I said, otherwise he will give a misleading slant to my views.

Mr. Meacher: Would the hon. Gentleman like to state his position on this issue?

Mr. Jenkin: The hon. Gentleman referred to what I said.

Mr. Meacher: I was not quoting the hon. Gentleman's words. I was putting forward what I thought was clearly his view, which he gave the House a few nights ago in his winding-up speech. I do not think that the hon. Gentleman can escape from the view—but I invite him to try—that he accepts that where tax avoidance can take place within the law that is acceptable to the Conservative Party and to the Government. I submit that such split-mindedness will not do. The Government cannot pose on the one hand, acting on the advice of the Inland Revenue, as the guardians and upholders of the tax laws, while at the same time conniving at the efforts of the City to undo the effects of those same laws. Morality cannot be divided by such unscrupulous hair-splitting distinctions.

Sir G. Nabarro: While we are on the question of fiscal morality perhaps the hon. Gentleman could explain to the Committee why the Labour Government decided that it would be a good thing to retain capital gains duty not only in respect of appreciation, of equities or unit trusts but also capital gains duty on all gilt-edged stocks, thereby so warping the whole of the capital gains duty arrangements as to invite on the part of all investors legal avoidance of capital gains duty. Answer that point.

Mr. Meacher: I can very easily answer it.

Sir G. Nabarro: But the hon. Gentleman will only give a wrong answer.

Mr. Meacher: The hon. Gentleman would be advised to listen before he makes a judgment. It seems to me that fiscal administration of the market of this kind is entirely separate from legal avoidance, where the object is to reduce the amount of tax which has tended to accrue from capital appreciation. This is merely a perfectly proper way of manipulating the market to ensure a proper flow into a socially desirable end, such as gilt-edged stocks. It is entirely different.

Sir G. Nabarro: Since the hon. Gentleman feels that investment in gilt-edged stocks is socially desirable but that investment in, for example, I.C.I., the Hudson Bay Company, and other blue chip equity stock is socially undesirable, he should


take his fiscal philosophy to a soap box in Hyde Park rather than to employ it in a Committee of the House of Commons.

Mr. Meacher: Before making allegaitons of that kind the hon. Gentleman would do well to listen to the logic of what I have said.

Sir G. Nabarro: There is no logic in it.

Mr. Meacher: The fact that the hon. Gentleman does not understand it does not mean that there is no logic in it. The fact that socially it is proper to manage the market in a particular way by no means indicates that it is socially improper—and, of course, it is not—to invest in blue-chip equities. The point I am making is that since discretionary trusts are widely recognised as tax avoidance devices on a massive scale, and since it is widely accepted that they have lost whatever positive function they may have had, the Government's refusal to move on this matter can only be construed as condoning manipulation by the rich, while at the same time busily appointing the Fisher Committee to pry into the petty misdeeds of the poor.
The Government's indifference to the violation of the proper function of family settlements is also evident from international comparisons. The American and West German Governments at present have recently been endeavouring to take steps to overcome the protection afforded from investigation by the tax authorities as a result of establishing a trust in Lichtenstein, with its favourable trust laws, and the opening of a Swiss bank as trustees to take full advantage of the Swiss banking secrecy laws. But this Government's palsied posturing of inactivity on this account is now to be reinforced by Clause 49. As a result these private trusts will be freed even further from any regulation whatever.
This same insouciance was displayed in an Answer given to me by the Financial Secretary on 11th February. I then asked:
how many private discretionary and other family settlements are in operation in Great Britain; and what is his estimate of the amount of money covered by such trusts?
The Answer was:
This information is not available."—[OFFICIAL REPORT, 11th February, 1971; Vol. 810, c 241.]

And the Government have no intention of finding out.
Professor Ravel, an extremely well known authority on this subject, is perhaps more mindful of this matter than the Government and recently sought to establish the magnitude of these trusts by calculating the aggregate market value of personal trusts administered by corporate trustees. The figure he reached for 1961 was £1,700 million. Today it is probably nearer £3,000 million.

Sir G. Nabarro: He made it up.

Mr. Meacher: The hon. Member for Worcestershire, South makes such remarks when he finds certain facts extremely inconvenient.

Sir G. Nabarro: rose—

6.45 p.m.

Mr. Meacher: No, I will not give way to any further unnecessary interruptions based on such lack of knowledge. As I was saying, the value of such private trusts today is probably in the region of £3,000 million, but even in 1961 they came to a value of some 3½ per cent. of the Inland Revenue's estimate of total net personal wealth.
I return to my fundamental question. What do the Government regard as a proper system of tax for discretionary trusts? There was an advertisement only a year ago in the Law Society Gazette which said
The disadvantages caused by the Finance Act 1969 can be overcome with skilful drafting and careful administration. It is possible to (1) avoid a charge to estate duty on a trust asset on the death of any beneficiary, (2) increase the net income to beneficiaries, and (3) avoid the charge to capital gains tax normally made on trust assets.
Of course, the third of those does not now apply since it has been made entirely otiose by the Clause. But these were not mere preening of advertisement copy. Since the central difficulty in taxing discretionary trusts, that of measuring what share of the total income of the fund any single beneficiary may be said to own, has been resolved by calculating what share of the total income of the fund has been paid out to him over the seven years preceding his death, which in many cases is a nil amount, then death duty liability will still often remain even under the new dispensation at precisely nothing. By ensuring that the only beneficiaries to


whom income is paid are young ones, there is little risk even under the present rules. Where there are older beneficiaries who require further income, then various arrangements can be made—for example, by gearing the trust policies to capital appreciation without income, for example through life endowment policies, or through capital shares, or works of art which yield no income at all. I again ask what the Government intend to do about discretionary trusts. Do they propose to stand idly by while permitting this flagrant tax avoidance to flourish, which is contrary to any clear function served by such family settlements?
This prompts me to ask my second main question. With what justification do the Government propose to abolish certain capital taxes when it is widely acknowledged that the volume of taxes on capital is unduly low in comparison with the volume of taxes on income? Also there is evidence that the discrepancy is widening. In 1969–70 taxes on capital comprised only 8·4 per cent. of the total Government tax revenue, while taxes on income came to 91·6 per cent. But by 1970–71 the provisional outturn suggests the proportion yielded by capital taxes fell to 7·9 per cent. Do the Government intend to promote this trend artificially even further? Will the Financial Secretary tell the House loud and clear precisely what the Government regard as the proper balance of taxes on capital as compared with taxes on income?
The Clause will not make a huge difference, at least in the short term, to the Treasury's coffer. Of far greater symbolic importance is the glaring manner in which it has once again been so clearly exposed how soft the Government are on wealth holders, and softest of all on that tiny coterie of its supporters whose wealth is large enough to be tied up in sizeable discretionary trusts and whose obvious machinations will now be able to proceed much more easily.

Mr. Peter Rees: I had not intended to intervene in the debate but, having been treated to a lecture on tax avoidance by the hon. Member for Oldham, West (Mr. Meacher), a lecture larded with unlikely metaphors and a great deal of inaccuracy, I feel stung to intervene briefly—

Sir G. Nabarro: Mostly hallucinations.

Mr. Rees: The burden of the hon. Gentleman's complaint seems to be, on the one hand, that the rather unworthy measures of the capital gains tax legislation in 1965 are to be decently interred today, or so I hope, or, on the other hand, those measures were not particularly effective. It must be one way or the other, but not both. Perhaps at the risk of sounding a little portentous I may be allowed to put him right on one or two things.
In point of history, discretionary settlements were not known in feudal times, and were never a satisfactory vehicle for holding land. On the matter of tax avoid-dance, in which he, like so many of his hon. Friends, seems to be obsessed, it was not all that easy to escape the 15-year charge by appointing an annuity. Many professional people would have been very doubtful about giving that advice. It is only because the hon. Gentleman has never had the responsibility of giving professional advice that he has made it sound so simple.

Mr. Meacher: From his vast knowledge, as someone who did give professional advice, will the hon. and learned Gentleman say what professional advice he would have given to enable rich clients to avoid this duty?

Mr. Rees: I will certainly not bore the House with advice which I might have given in a hypothetical situation.
Forgive me for sounding a little pedantic, but if the hon. Gentleman had had to cope with the multiplicity of cases one meets in professional life, the variations in settlements and so on, he would not have made the avoidance measures which he has been bandying around sound so easy. They are by no means foolproof, and I very much doubt whether those who are advising my hon. Friend the Financial Secretary to the Treasury would have said that they were not worth testing out in the courts. If they had been worth testing out in the courts, I am not at all certain that they would have stood up to close scrutiny.
The hon. Gentleman said that the charge on death was not very effective because it was deductible. Again, it must be one way or the other. Until this Finance Bill there were two charges on death, one under estate duty and one


under capital gains tax. It is not, as the hon. Member for Ashfield (Mr. Marquand) said, as if they were charged on different bases. It is a case of the greater comprising the less. Estate duty is subject to a low threshold, and here I congratulate my right hon. Friend the Chancellor of the Exchequer on raising the threshold. I hope that he will raise it further in subsequent Finance Bills. Subject to that threshold, every single asset, whether or not it has increased in value, is subject to estate duty. Capital gains tax was charged only on capital appreciation. Since we are talking about capital appreciation in an era of inflation, it is right to stress that many chargeable gains are not in any real commercial sense a gain. They are purely illusory.

Mr. Barnett: Wages.

Mr. Rees: Wages on the whole have done considerably better than dividends. The share taken by dividends has been a good deal less over the last ten years. Dividends have not held their proportion in an inflationary era, and we have to bear that in mind.
The third point casually thrown out by the hon. Member for Oldham, West was, "What about Lichtenstein settlements?" There are, first, certain exchange control difficulties and, beyond that, Section 412 of the 1952 Act, now incorporated in the 1970 Act, makes it difficult to set up a foolproof foreign settlement. There are considerable difficulties and I am not persuaded that all that number are invulnerable to the Revenue. I am not encouraging my hon. and right hon. Friends to probe more deeply, but it is wrong for the hon. Member for Oldham, West to pretend that one only has to whistle up some smart lawyer in Zurich or Vaduz and one's problem is solved.
On the point that discretionary settlements can run on and on, keeping a vast agglomeration of wealth out of the clutches of the Revenue, all I say is, good luck to them, because the Revenue dips its shovels too deeply into agglomerations. As the hon. Gentleman was fair enough to point out, discretionary settlements can at a maximum run only for 80 years. In any event, they are often broken up before. They are not a vehicle carrying family wealth into infinity.
I wish to stress one particular disadvantage of the 15-year rule. My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) touched on this. Supposing a person has a small family company and wants to preserve the shares in the family. He puts them into a discretionary settlement. It may be that they do not generate a great deal of income and it may be that there are no other assets in the settlement. How can one meet the 15-year charge other than by selling shares in the family company? It may be possible to get accommodation from the I.C.F.C., but that is not the way to build up a small or medium-sized family company. If one wants diversity and business experience, and if one wants to encourage initiative, these are the companies to encourage, and these are the companies which are hit particularly by this ill-judged measure.
Anything that limits the charge to capital gains tax to situations where a genuine gain has been realised and where cash has actually come into the pocket is to be welcomed. There is a very good case on grounds of administrative efficiency and complication for abolishing it altogether. The cost of collection is so astronomic compared with the amount collected that I hope my right hon. Friend will seriously consider, politics apart, whether there are not good economic, social and administrative reasons for abolishing it altogether.
That is not the point we are debating today. Today we are decently interring two unreasonable little measures introduced in 1965 which, as the hon. Member for Oldham, West has pointed out, have not been entirely successful, even from his point of view. I shall vote for this measure with real conviction and absolute pleasure.

Mr. Dalyell: The hon. and learned Member for Dover (Mr. Peter Rees) cannot be entirely surprised that we are obsessed with tax avoidance when one thinks of the sheer amount of brain power devoted to income tax advisers and income tax lawyers. The contrast that occurs to many of us is that if we are obsessed with this why is the party opposite obsessed with the trivia? Had the Conservative Party not been obsessed with trivia it would not have set up the Fisher Committee. We seem to have an extraordinary scale of values. We are


told not to be obsessed with substantial sums of money, yet a family which, if not on the poverty line, may be at least very near it has to go through a rigorous, unpleasant, often degrading and undignified examination. This is what many decent people of all political thought object to.
The hon. and learned Member for Dover said that it is not as easy as just whistling up a smart lawyer in Zurich or "Bad" something—

Sir G. Nabarro: Vaduz, Lichtenstein.

Mr. Dalyell: Obviously the hon. Member for Worcestershire, South (Sir G. Nabarro) is well versed on the advice which is available in Lichtenstein.

Sir G. Nabarro: I know the geography of Europe and I know exactly what goes on in Vaduz, Lichtenstein, but I do not suppose the hon. Gentleman has ever heard of it.

Mr. Dalyell: The hon. Member for Worcestershire, South (Sir G. Nabarro) knows his way around. We on this side of the Committee want to help a few people who do not know their way around.

Sir G. Nabarro: I spend my life leading the hon. Gentleman.

7.0 p.m.

Mr. Dalyell: There is a major point here. Here we have the admission that there are those who know their way around, who have, perhaps, the education and the certainly the finance to employ lawyers, and those who do not. This is a very serious kind of division because it leads to a great deal of ill feeling. When hon. Gentlemen opposite ask about one of the causes of the economic dissatisaction in this country, they could do no better than to look at this matter fairly objectively.
As a Scottish Member of Parliament, I say to the hon. Member for South Angus (Mr. Bruce-Gardyne) that his speech seemed very curious. Surely the smallest companies, on whose behalf he was trying to win sympathy, are exempt anyway. To exempt the bigger companies would surely create the most enormous loopholes in the capital gains system, and here there would really be a complete blow to

equity. Of course, in the well-run closed company, we all know that arrangements can be made to protect genuine company interests. If there are examples of a serious company in Scotland, giving employment, which has failed to make these arrangements, I should be interested to see them, either in public or in private.
What especially bothers us, as my hon. Friends have said at length and with considerable eloquence, is that what this is all about is the redistribution of wealth, and it is the redistribution of wealth in the wrong direction. I can understand that the Treasury may have administrative arguments, and we have to try to be fair minded about it. Here I think that my question may be answered to my disadvantage, but I should like to know what the valuation problems are in trying to calculate, on top of estate duty, capital gains duty on death. There may be none. On the other hand, it strikes some of us who have come back to this subject that the problems of the shortage of valuers are very real. I put that in question form because I want a Treasury view on the subject. But whatever the answer to that particular question, because it is redistributing wealth in the wrong direction it is a very unsatisfactory move.

Sir T. Brinton: I should like to try to bring the debate back to what we are really talking about. We had a long and interesting lecture on how to avoid taxation given by the hon. Member for Oldham, West (Mr. Meacher), and I thought that I was learning something until my hon. and learned Friend the Member for Dover (Mr. Peter Rees) shot him down. We are back where we started.
Basically we are talking about capital gains tax. I was interested in the speech of the hon. Member for Ashfield (Mr. Marquand) because he said something in the context of capital gains tax with which I would agree. His first point on the basis for capital gains tax is that it is a way of taxing the increase in spending power which arises from the possession of capital. I am paraphrasing what he said. Those are not his words but I think that he would accept that that is what he meant. So far so good. But spending power, as I said in an intervention, only exists when the asset is turned into a spendable form, that is, cash. The fact that one possesses, for instance, an ancient castle in Scotland which may


theoretically have a great value is of no use if it cannot be sold, as many unfortunate possessors of castles have discovered. They may have a theoretically large value, but this is immaterial if it is not turned into spendable wealth.
There is a confusion in the minds of hon. Gentlemen opposite, even in the context of their own opinion on this matter. Wealth and the use of it can only be expressed in terms of spending power. If one has a large and valuable asset in the form of shares or gold bars but one never spends it, that does not affect the economic activity of the country nor does it buy one so much as a single extra whisky and soda. But when one turns it into cash and spends it, when one is then enjoying it, it is at that point that the capital gains tax takes care of the difference between those with capital and those without it—when it comes to spending power. I have always thought that that was the whole basis of the tax.
The hon. Member for Ashfield took us a step further. He said that our object was the redistribution of wealth. In other words, despite the fact that wealth has been accumulated, saved and preserved and only the income from it used—and heavily taxed—that does not matter to him. He must destroy the capital asset by getting it dished out by one means or another. His Government adopted the very unfair means of deemed proposals where no cash transaction has taken place. I maintain that this is a logical contradiction.
If we confine capital gains tax—at 30 per cent., the highest capital gains tax in the world—solely to occasions when an asset has been realised and turned into cash, we shall get as much social justice as we can and, at the same time, equity between one payer of the tax and another. This is the centre of our argument at this stage and of the Amendment. It is the illogicality of having certain human events and transactions involving no alteration in the status of an asset or liability to tax when in all other circumstances the only liability for tax on any asset is when one sells it. This seems illogical and unfair.
Even taking the argument of the Labour Party as to redistribution of wealth, this is sufficiently catered for by catching for tax assets whenever they are

realised and turned into cash. If we limit it to that, we shall get just as sure a redistribution as we ever will by the previous means.
The arguments about discretionary and other forms of trust are not germane to the question of capital gains tax. If hon. Members opposite want to do something about those, they will have to find a means of doing so, and no doubt they can. But to try to tackle this question by subjecting to capital gains tax assets not realised is not, even by their book, the right way to go about it.
I hope that the Government will listen carefully to what has been said. The concessions are very welcome and fair regarding death and the avoidance of a double tax in that rather unfortunate circumstance. We should remember that we are talking about the highest rate of death duty in the world. Hon. Members opposite talk as though we were taxed at the same rate as other nations. We speak of exemptions which no other nation would be foolish enough to follow.
In considering the whole question of estate duty, I hope that the Government will remember the adverse effects that it has on the family unit. The French have fully realised this in the exemptions and reliefs for inheritances within the family and in the fact that the duty there is not an estate duty but a legacy duty, so as to preserve the family unit while catching at a very high rate people outside the family, or relatives not particularly close. We should adopt that system.
On top of a death duty rate going up to 80 per cent., further to levy capital gains tax as well is an injustice, and we welcome the fact that the Government have dealt with it. We ask the Government to bear in mind that, none the less, they have left one or two anomalies untouched, and we hope that they will deal with them next year.

Mr. Patrick Jenkin: This has been an interesting debate. Perhaps I might begin by correcting an intervention which I made in the speech of the hon. Member for Ashfield (Mr. Marquand) when he asked about the cost. The gross cost of the capital gains tax relief under this Clause is £30 million, but made up as £25 million for the relief on death and some £5 million for the relief on discretionary trusts. But as against that there


is the increased charge to estate duty, for the reasons which the hon. Member for Oldham, West (Mr. Meacher) gave, because there will now be no relief from estate duty for the capital gains. That is £15 million, so that the net cost is £15 million.
The hon. Member for Ashfield said that that was all right for next year but asked: what about the position in the years ahead? When we say a full year, we mean a full year. It has never been the practice of Treasury Ministers to try to forecast the effect of tax changes over a long period. Some effort was made when capital gains tax was introduced to say that it would not raise much in the first few years but that after a while it would raise a little more. The yield has risen, but it is asking too much to expect the Treasury and the Inland Revenue to attempt to estimate over a long period the effect of a single change of this nature.

Mr. Marquand: Of course I accept that the hon. Gentleman cannot give anything like precise figures, in the nature of the case, and I take his point that, normally, it would be unreasonable to ask the Treasury to make judgments of this kind about future yield of taxes, but surely, in this case, since the nature of the tax is such that it is bound to build up over a considerable period, it is not unreasonable to ask the Minister for some indication of the order of magnitude which he has in mind.

Mr. Jenkin: However hard the hon. Gentleman presses me, I will not be drawn on this, because I simply have no figures that I can quote to the Committee. However, clearly, as the yield from estate duty rises, presumably so will the effect of what is here being relieved.
The hon. Member's second question was whether we were afraid of the phenomenon which he described as "locking in", which had happened in the United States. He asked what the cost of locking in might be and quoted the United States figure of two-thirds of the total yield. But, as my hon. Friends have said in this and the earlier debate, the United States capital gains tax is of a very different sort. It is, in fact, only on gains realised for cash, and, therefore,

does not have the scope of the capital gains tax in this country.
We have included in the figure of £15 million—I would ask the Committee not to press me on this—some estimate of the effect of some "locking in", because it would be foolish to deny that this would happen. But there are many factors which weigh with elderly people as to whether or not they sell or retain investments to the ends of their lives. The experience which we have gained as a result of the £5,000 exemption has not suggested—[Interruption.] The hon. Member is aware that there is a £5,000 exemption at present and that if one holds on to one's gains until death, the £5,000 would apply. There is not much evidence that that has influenced the investment holding habits of elderly people.
We do not expect the effect of "locking in" bearing in mind our capital gains tax, to be anything like that described by the Secretaries to the Treasury in the evidence read by the hon. Member for Ashfield. But perhaps the strongest argument is that one cannot draw parallels between what happens in America and what happens here on the interaction of capital gains tax and estate duty without taking into account the enormous disparity between the levels of estate duty in this country and in America.
Taking an estate of £25,000, the estate duty in this country is 14 per cent. and in America it is nothing. On an estate of £40,000, it is 23·7 per cent. here and 4·25 per cent. in America. On £100,000 in this country it is 46·5 per cent., and in America 1863 per cent. One is dealing with a totally different order of magnitude, and the whole essence of the Clause is that the gains themselves are liable to tax at these very steep rates in any event.

[Mrs. LENA JEGER in the Chair]

7.15 p.m.

Mr. Dick Taverne: I would not deny that the rates of estate duty in America are much lower than they are here, but the hon. Member should not exaggerate them. If one considers the sums involved as a proportion of wealth and as a proportion of the wealthiest, the figures are quite different from those which the Minister cited. Facile comparisons based on exchange rates are always misleading in this kind of context.

Mr. Jenkin: This would to some extent be so, although the gap is narrowing, but it is very difficult. One could concoct figures on a comparable cost of living index—[Interruption.] But that will not make all that much difference to the enormous disparity of figures which I have quoted. On £1 million the rate would be 38·33 per cent. in America, whereas it is nearly 75 per cent. here.
If only that rate of estate duty is suffered in America and one is not charged to capital gains on death, there is, of course, every incentive to hold the property until death. In this country the pressures and effects of the interaction between the burdens of estate duty and the burdens of capital gains tax are totally different, so I do not begin to draw the same gloomy conclusions which the hon. Member drew from the evidence which he cited which had been given to Congressional committees.
The hon. Member surprised me—I fear that this will hang around the neck of the Labour Party like a millstone—by showing that, at this stage of a Parliament, they are prepared to start making specific tax commitments of that sort. The wisdom of my right hon. Friends when in Opposition was that we did not make any specific tax commitments until right at the end. The hon. Gentleman will probably rue the day that he pledged his party to repeal this Clause. He will dismay some of his hon. Friends. When the Clause which we are now nullifying was introduced in 1965, many of his right hon. and hon. Friends spoke very strongly against it. I was tempted to do no more than read out the speeches of the right hon. Member for Manchester, Cheetham (Mr. Harold Lever)—

Mr. Barnett: I have read them.

Mr. Jenkin: Then it will come as no surprise to the hon. Gentleman to know that his right hon. Friend, who subsequently became a Treasury Minister, in the strongest possible language—bearing in mind that he was addressing one of his own hon. Friends, one of my predecessors as Financial Secretary—opposed the charge of capital gains on death. In one of his speeches—

Mr. Barnett: Mr. Barnett indicated dissent.

Mr. Jenkin: The hon. Gentleman may shake his head, but he should listen to

this, because he need not assume that all his hon. Friends will warmly support the pledge which the hon. Member for Ashfield gave.
In the Committee on the 1965 Finance Bill, dealing with the Clause which this Clause nullifies, the right hon. Gentleman said in one of the most astonishing passages in his speech:
The Financial Secretary will be relieved to know that I propose to express strong support for him. It is true that it will take the form of inviting the Government to drop the whole proposition of making Capital Gains Tax payable on death.
I would say to the hon. Member for Oldham, West that the right hon. Gentleman went on to make a perfectly valid point:
But, ex hypothesi, the Clause will bear on those people who do pay it. The people who avoid and evade it will not bear the Capital Gains Tax on their estates."—[OFFICIAL REPORT, 26th May, 1965; Vol. 713, c. 638, 639.]
The charge to capital gains tax on deemed disposal automatically catches only those people whose estates are brought into charge to estate duty, so to regard the deemed disposal on death as in some way countering the tax avoidance which we all know happens because of the rearrangement of estates and assets is to delude oneself. The point was adequately made there by the hon. Gentleman's right hon. Friend.

Mr. Dalyell: Having said that tax avoidance takes place, is it not rather ungenerous of the hon. Gentleman not to rebuke his hon. and learned Friend the Member for Dover (Mr. Peter Lees) for saying that we are obsessed with the subject?

Mr. Jenkin: I will come to the question of tax avoidance shortly.
It was not only the right hon. Member for Manchester, Cheetham who took that view. A gentleman by the name of William Baxter, who used to represent West Stirlingshire-[HON. MEMBERS: "He still does."] I apologise to him. Let us say that we have missed the hon. Member. [Interruption.] I understand that he has been far from well.
Mr. Woodrow Wyatt is another who expressed himself in strong language against the Labour proposal of that time, but I will spare the Committee quotations from his speeches. The hon. Member for


Heywood and Royton (Mr. Barnett) picked on the one thing that would affect him—namely, capital gains tax on the goodwill of his professional accountancy business—and he said that that should not be charged to capital gains tax. That was understandable. The estate which he will have built up by his professional skill and hard work throughout his lifetime will be charged to estate duty, unless he is skilful enough to make dispositions to avoid that. Not only Labour hon. Members have taken this view. The right hon. Member for Orkney and Shetland (Mr. Grimond) said that it was wrong to impose on the same assets a further tax in respect of capital gains and that it seemed eminently sensible and compelling not to do so.
The case which my right hon. Friend made in his Budget Statement and which I have reiterated is that it is nonsense, given the rates of estate duty that we charge, to subject estates on death to the further tax of capital gains tax. The sheer inequity of this is shown by the fact that the proportion of total tax on death as represented by capital gains as opposed to estate duty is vastly higher on small than on big estates.
The figures are illuminating. Assuming the case of an estate of which one-quarter of the value is represented by gains—one can take different figures and go up to one-half or down to one-tenth-in 1970–71 on an estate of £25,000 the capital gains tax was £375 and the estate duty was £4,012, giving a total of £4,387. In 1971–72 the total tax paid on death will be £3,500, and, therefore, the ratio of gains tax to estate duty is 20·2 per cent.
However, if one takes an estate of £1 million, the capital gains tax is £73,500 and the estate duty is £684,650, giving a total of £758,150, compared with £746 in the current year with no capital gains charged; and the ratio, instead of being 20 per cent. in the case of a £25,000 estate, is now only 1·5 per cent.
In other words, by reimposing the deemed disposal charge on death, hon. Gentlemen opposite would be imposing a vastly greater burden on small estates compared with the largest, which seems astonishing for any political party to do, let alone the Labour Party.
Hon. Gentlemen opposite cannot have thought out the implications of what they

are doing. If the disparity is as great as that—as great as one-fifth on a £25,000 estate and only 1·5 per cent. on an estate of £1 million—I seriously question whether they could have thought out this pledge before giving it because it cannot represent sensible fiscal policy.

Mr. Meacher: Is not the mystery which the Financial Secretary purports to find simply pricked by the fact that people with very large estates do not pay estate duty in anything like the amounts that the hon. Gentleman has said they do? Far from being a highly progressive tax in this country, estate duty is probably in practice a regressive one. His figures are, therefore, totally meaningless.

Mr. Jenkin: I advise the hon. Gentleman to read the speeches that were made in 1965 by his right hon. Friend the Member for Cheetham, who pointed out that it is only when estate duty is charged that the capital gains tax deemed disposal charge on death comes into play. It does not attach to people who escape estate duty.
Consider, next, discretionary trusts. The Labour Party introduced estate duty for discretionary trusts in 1969. It was hon. Gentlemen opposite who set the seven-year limit, of which the right hon. Gentleman was so critical. To reimpose capital gains tax on deemed disposals on death is a grossly regressive form of taxation to introduce, as the figures make abundantly clear.
What are the other reasons why we wish to abandon this dual charge on death? The hon. Member for Oldham, West asked what were the likely savings in manpower. The answer is 50 man years of time in the Inland Revenue and vastly more among taxpayers and their advisers, as the hon. Member for Heywood and Royton will confirm.
I am sorry that I did not answer the question posed by the hon. Member for West Lothian (Mr. Dalyell) about taxation on remarriage. I would like to look into that and I will write to him.
The hon. Member for Oldham, West referred to tax avoidance generally. I assure him that, as part of our general review of taxation, we always have regard to the protection of the Revenue from unacceptable avoidance. However, tax avoidance is, as much as anything


else, a product of high rates of taxation. It is the purpose of the Government to bring our rates of taxation down to more reasonable levels, and by that means we hope significantly to reduce the amount of avoidance.
It is always the duty of Treasury Ministers to secure a balance between the needs of the Revenue, equity and the climate of economic wealth. There is no doubt that excessive rates of taxation—as in this case a dual burden of tax on death—affect the climate of wealth of companies, and particularly of family companies, on which so much of the prosperity of the nation depends.
When I heard the hon. Member for Ashfield give that foolish pledge, which the Opposition will regret, I was reminded of that celebrated intervention by the hon. Member for Edmonton (Mr. Albu) in a speech by my right hon. Friend the Prime Minister when he was Leader of the Opposition. My right hon. Friend said that the Labour Government's taxation policies would mean the end of the small family company, and the hon. Member for Edmonton was quoted in HANSARD as saying, "And about time." The hon. Member for Ashfield, by giving that pledge, has declared no less unmistakably unremitting hostility to tens of thousands of family companies, and I have no doubt that they will take note of what he has said when considering how to vote at the next Election.

7.30 p.m.

Mr. Barnett: I am afraid that it looks as though we are going to spend a lot of time in Committee upstairs, because the Financial Secretary does not seem to have taken to heart the way in which my noble Friend, Lord Diamond, used to deal with these debates when he was Chief Secretary to the Treasury.

Sir G. Nabarro: Look where it got him! He got knocked out.

Mr. Barnett: An interesting point, but nevertheless, as hon. Members who were in the last Parliament will recall, under the most intense provocation my noble Friend showed an equanimity and a lack of patronising manner which we have certainly not had from the Financial Secretary. If the hon. Gentleman intends to go on being patronising in

that way, we shall take an awful long time upstairs in Committee.
It is interesting to note the hon. Gentleman's selective agreement with what has been said from time to time by my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever). I am very fond of my right hon. Friend, but I do not mind occasionally selectively disagreeing with some of the things he has said. I am not prepared to agree with all that he has said, but it is interesting to see that the Financial Secretary is accepting as gospel, as it were, certain things said by my right hon. Friend, particularly in relation to capital gains tax, although my right hon. Friend in fact holds certain views which the hon. Gentleman is not quite so keen on.
I want to take up the main point on the question of deemed disposal. I wonder whether hon. Members opposite quite realise what they are doing. The hon. Member for Kidderminster (Sir T. Brinton) accused us of being, as it were, vindictive, of not understanding what we were saying or doing.

Sir T. Brinton: I said nothing about vindictiveness.

Mr. Barnett: What the hon. Gentleman and some of his hon. Friends have been saying about deemed disposal leads me to believe that they cannot nave understood the massive loophole that is left once one decides that a capital gain should only be taxed when realised for cash.
On the previous Amendment, the Financial Secretary, dealing with the question of whether or not one should revert at some time in future to disposals only for cash being subject to capital gains tax, gave a reply which was far from satisfactory. He did not give a clear denial that he would not perhaps one day revert to taxing capital gains only on cash disposal. If he is going to have that sort of capital gains tax, then, in effect, he is killing it. If that is what the Government want to do they should be honest enough to say so rather than dig a massive hole which will virtually kill the tax. The hon. Gentleman made it clear that he would not do anything this year on the question of trusts. He left himself free to deal with this; on another occasion. He implied that he


is prepared at some time in future to consider gains tax purely and simply on disposal for cash, with all that that would mean. None of the lucid and strong arguments presented by my hon. Friend the Member for Ashfield (Mr. Marquand) have been answered by hon. Members opposite.
The Financial Secretary did not reply effectively on the question of the economic effect of the locking in which will occur on this Clause. He made only two points. First, he claimed, one cannot compare it with the United States position, because one has to look at the levels of estate duty in this country. But, as my hon. Friend the Member for Oldham, West (Mr. Meacher) rightly said, to quote the levels of estate duty in this country is totally misleading because they are not paid. The hon. Gentleman's second argument on the economic effect of locking in was that there is no evidence that this is likely to happen because the exemption we now have for up to £5,000 has not proved that this is the case at present. That is not an argument at all. We are talking about a totally different situation where one is exempting everything rather than just the comparatively small amount of gains of £5,000. We really have not had an answer to the economic arguments put by my hon. Friend the Member for Ashfield.
The argument about double taxation is a myth because, in practice, capital gain is an increase—certainly as far as we on this side are concerned. There is a difference between taxing a capital gain and taxing the capital. If hon. Members opposite cannot appreciate that, then we have not been able to persuade them in the debate. That being so, I do not suppose that I shall be able to persuade them now. But, clearly, there is a considerable distinction between taxing capital and taxing an increase in that capital. If hon. Members opposite cannot see that, then I am afraid that we are not getting very far.

Mr. Patrick Jenkin: The hon. Gentleman is talking about the two taxes. It occurs to me that I may inadvertently, not have got the drift of the argument wrong, but may have misled the House on the 20 per cent. and 1·5 per cent. figures which I quoted. These are actual reductions in tax-20 per cent. at the

£25,000 level and 1·5 per cent. at the £1 million level. That is the effect of the two taxes the hon. Gentleman is talking about.

Mr. Barnett: The hon. Gentleman is quoting figures which are irrelevant, because it all entirely depends on the sort of capital gain element in the £25,000 and the capital gain element in the £1 million estate. It is no use his giving us these irrelevant figures.
I turn now to the question of hardship to the small close company. The hon. Member for South Angus (Mr. Bruce-Gardyne) was kind enough to quote what I said in the 1965 debates and the fact that I was making a plea not necessarily for myself but for smaller professional firms and their goodwill. [Laughter.] I do not want to pretend to the Committee that I am wholly altruistic in these matters. I am as happy as anyone else to have my own tax reduced.
There was considerable exemption for small close companies, but to suggest that we should exempt all close companies, no matter what their size, from capital gains tax in the way suggested would be to create an enormous loophole, and to say that the present situation is, as it were, a death blow to family companies is outrageous nonsense. If such a company left itself in such a state that it was destroyed, then, quite frankly, it would deserve to be. If it were so ill-advised as not to prepare itself for the possibility that a director would die and therefore have to pay estate duty, then it would have a singularly badly-advised board of directors.

Mr. Peter Rees: How can a company assist the personal representatives of a deceased shareholder to meet estate duty?

Mr. Barnett: I am surprised at the hon. and learned Gentleman asking me such questions. I can assure him that there are possibilities for close companies to help themselves to avoid the worst incidence of estate duty. If the hon. and learned Gentleman would care to see me outside I will explain them to him. It would be an extraordinarily bad close company which left itself in such a position that it would be destroyed because of either this tax or estate duty.
The only other argument was that which we heard on the question of trusts.


We had tear-jerking speeches about how terrible it was that poor beneficiaries of trusts would be subject to capital gains tax. The hon. and learned Member for Dover told us that it is not easy to set up trusts. I agree, but that is not an argument for allowing a trust and the tax avoidance on a massive scale that goes with it.
I accept that we shall not be able to convince right hon. and hon. Members opposite. The philosophical difference between us is that we on this side consider capital gains to be another form of income which should be taxed. Hon.

Members opposite seek by every loophole possible to allow the maximum possible avoidance of this tax. They would be more honest if they said forthrightly, "We do not want a capital gains tax". Instead of that, they want to assist trusts, settlements and every other form of avoidance. We on this side think that the Clause is the thin end of the wedge. I ask my right hon. and hon. Friends to vote against it.

Question put, That the Clause stand part of the Bill:—

The Committee divided: Ayes 155, Noes 116.

Division No. 369.]
AYES
[7.45 p.m.


Adley, Robert
Goodhew, Victor
More, Jasper


Atkins, Humphrey
Gorst, John
Morrison, Charles (Devizes)


Baker, Kenneth (St. Marylebone)
Gower, Raymond
Nabarro, Sir Gerald


Baker, W. H. K. (Banff)
Grant, Anthony (Harrow, C.)
Neave, Airey


Barber, Rt. Hn. Anthony
Gray, Hamish
Normanton, Tom


Bell, Ronald
Green, Alan
Nott, John


Benyon, W.
Grieve, Percy
Oppenheim, Mrs. Sally


Biffen, John
Grimond, Rt. Hn. J.
Orr, Capt. L. P. S.


Blaker, Peter
Grylls, Michael
Owen, Idris (Stockport, N.)


Boardman, Tom (Leicester, S.W.)
Gummer, Selwyn
Page, Graham (Crosby)


Body, Richard
Gurden, Harold
Pardoe, John


Boscawen, Robert
Hall, John (Wycombe)
Parkinson, Cecil (Enfield, W.)


Bossom, Sir Clive
Harrison, Brian (Maldon)
Percival, Ian


Bowden, Andrew
Hawkins, Paul
Powell, Rt. Hn. J. Enooh


Boyd-Carpenter, Rt. Hn. John
Hay, John
Pym, Rt. Hn. Francis


Bray, Ronald
Hayhoe, Barney
Raison, Timothy


Bruce-Gardyne, J.
Higgins, Terence L.
Redmond, Robert


Buck, Antony
Hiley, Joseph
Reed, Laurance (Bolton, E.)


Butler, Adam (Bosworth)
Hill, James (Southampton, Test)
Rees, Peter (Dover)


Carlisle, Mark
Holland, Philip
Nippon, Rt. Hn. Geoffrey


Chichester-Clark, R.
Hordern, Peter
Rossi, Hugh (Hornsey)


Churchill, W. S.
Hughes, Robert (Aberdeen, N.)
Rost, Peter


Clark, William (Surrey, E.)
Hunt, John
Russell, Sir Ronald


Clegg, Walter
Hutchison, Michael Clark
Scott-Hopkins, James


Coombs, Derek
Iremonger, T. L.
Shelton, William (Clapham)


Cordle, John
James, David
Soref, Harold


Cormack, Patrick
Jenkin, Patrick (Woodford)
Spence, John


Costain, A. P.
Jennings, J. C. (Burton)
Stainton, Keith


Critchley, Julian
Kilfedder, James
Stewart-Smith, D. G. (Belper)


Crouch, David
King, Tom (Bridgwater)
Stodart, Anthony (Edinburgh, W.)


Crowder, F. P.
Kinsey, J. R.
Stokes, John


Curran, Charles
Knox, David
Stuttaford, Dr. Tom


d'Avigdor-Goldsmid, Maj.-Gen, James
Lane, David
Sutcliffe, John


Dean, Paul
Langford-Holt, Sir John
Taylor, Frank (Moss Side)


Deedes, Rt. Hn. W. P.
Legge-Bourke, Sir Harry
Taylor, Robert (Croydon, N.W.)


Digby, Simon Wingfield
Lloyd, Ian (P'tsm'th, Langstone)
Temple, John M.


Dixon, Piers
Longden, Gilbert
Tugendhat, Christopher


Dodds-Parker, Douglas
Luce, R. N.
Turton, Rt. Hn. R. H.


Dykes, Hugh
McCrindle, R. A.
van Straubenzee, W. R.


Elliot, Capt. Walter (Carshalton)
McLaren, Martin
Vaughan, Dr. Gerard


Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Maclean, Sir Fitzroy
Vickers, Dame Joan


Emery, Peter
McMaster, Stanley
Waddington, David


Eyre, Reginald
McNair-Wilson, Michael
Ward, Dame Irene


Fell, Anthony
McNair-Wilson, Patrick (NewForest)
Warren, Kenneth


Fenner, Mrs. Peggy
Madel, David
Weatherill, Bernard


Finsberg, Geoffrey (Hampstead)
Mather, Carol
Wells, John (Maidstone)


Fisher, Nigel (Surbiton)
Maude, Angus
White, Roger (Gravesend)


Fookes, Miss Janet
Maudling, Rt. Hn. Reginald
Wilkinson, John


Fortescue, Tim
Meyer, Sir Anthony
Woodhouse, Hn. Christopher


Fox, Marcus
Miscampbell, Norman



Fry, Peter
Moate, Roger
TELLERS FOR THE AYES:


Gardner, Edward
Money, Ernie
Mr. Hector Monro and


Goodhart, Philip
Montgomery, Fergus
Mr. Keith Speed.




NOES


Albu, Austen
Atkinson, Norman
Blenkinsop, Arthur


Allen, Scholefield
Barnett, Joel
Callaghan, Rt. Hn. James


Archer, Peter (Rowley Regis)
Bidwell, Sydney
Carmichael, Neil




Carter, Ray (Birmingh'm, Northfield)
Jones, Dan (Burnley)
prentice, Rt. Hn. Reg.


Carter-Jones, Lewis (Eccles)
Judd, Frank
Prescott, John


Castle, Rt. Hn. Barbara
Kaufman, Gerald
Price, William (Rugby)


Cocks, Michael (Bristol, S.)
Kelley, Richard
Rees, Merlyn (Leeds, S.)


Crossman, Rt. Hn. Richard
Latham, Arthur
Roderick, Caerwyn E.(Br'c'n &amp; R'dnor)


Cunningham, G. (Islington, S.W.)
Lawson, George
Rodgers, William (Stockton-on-Tees)


Dalyell, Tam
Lee, Rt. Hn. Frederick
Roper, John


Darling, Rt. Hn. George
Leonard, Dick
Ross, Rt. Hn. William (Kilmarnock)


Davidson, Arthur
Lever, Rt. Hn. Harold
Sheldon, Robert (Ashton-under-Lyne)


Davies, Denzil (Llanelly)
Lewis, Ron (Carlisle)
Shore, Rt. Hn. Peter (Stepney)


Davis, Clinton (Hackney, C.)
Lipton, Marcus
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)


Deakins, Eric
Lomas, Kenneth
Silkin, Hn. S. C. (Dulwich)


de Freitas, Rt. Hn. Sir Geoffrey
Mabon, Dr. J. Dickson
Sillars, James


Douglas, Dick (Stirlingshire, E.)
McElhone, Frank
Skinner, Dennis


Eadie, Alex
Mackenzie, Gregor
Small, William


Edwards, Robert (Bilston)
Mackie, John
Spearing, Nigel


Fisher, Mrs. Doris (B'ham, Ladywood)
Mackintosh, John P.
Spriggs, Leslie


Fitch, Alan (Wigan)
McMillan, Tom (Glasgow, C.)
Stallard, A. W.


Fletcher, Raymond (Ilkeston)
MacPherson, Malcolm
Stewart, Rt. Hn. Michael (Fulham)


Foley, Maurice
Mallalieu, E. L. (Brigg)
Stoddart, David (Swindon)


Foot, Michael
Marks, Kenneth
Stonehouse, Rt. Hn. John


Fraser, John (Norwood)
Marquand, David
Strang, Gavin


Gilbert, Dr. John
Mayhew, Christopher
Summerskill, Hn. Dr. Shirley


Golding, John
Meacher, Michael
Taverne, Dick


Gordon Walker, Rt. Hn. P. C.
Mendelson, John
Thomas, Jeffrey (Abertillery)


Grant, John D. (Islington, E.)
Millan, Bruce
Torney, Tom


Hamilton, William (Fife, W.)
Molloy, William
Weitzman, David


Hart, Rt. Hn. Judith
Morgan, Elystan (Cardiganshire)
Wellbeloved, James


Hattersley, Roy
Morris, Charles R. (Openshaw)
Wells, William (Walsall, N.)


Healey, Rt. Hn. Denis
Morris, Rt. Hn. John (Aberavon)
Whitehead, Phillip


Horam, John
O'Malley, Brian
Whitlock, William


Houghton, Rt. Hn. Douglas
Orbach, Maurice
Wilson, Alexander (Hamilton)


Hughes, Robert (Aberdeen, N.)
Oswald, Thomas
Wilson, Rt. Hn. Harold (Huyton)


Hunter, Adam
Paget, R. T.



Jenkins, Hugh (Putney)
Parker, John (Dagenham)
TELLERS FOR THE NOES:


Jenkins, Rt. Hn. Roy (Stechford)
Pavitt, Laurie
Mr. Ernest Armstrong and


Johnson, James (K'ston-on-Hull, W.)
Perry, Ernest G.
Mr. William Hamling.

New Clause 4

RATES OF PURCHASE TAX

Purchase tax shall in future be charged at 10 per cent., 15 per cent., 30 per cent. and 50 per cent., respectively, on all goods to which the present rate of l3i per cent., 22 per cent., 36 per cent. and 55 per cent. apply.—[Mr. Roy Jenkins.]

Brought up, and read the First time.

Mr. Roy Jenkins: I beg to move, That the Clause be read a Second time.

The Temporary Chairman (Mrs. Lena Jeger): With this Clause we may discuss new Clause 1—Purchase tax (22 per cent. rate) and new Clause 2—Purchase tax (36⅔ per cent. rate).

Sir G. Nabarro: On a point of order, Mrs. Jeger. Will you be good enough to answer this point of order now? There is some contradistinction between new Clause 1, new Clause 2 and new Clause 4. Is it permissible to have separate Divisions on each of them?

The Temporary Chairman: No. New Clause 4 has been selected for a Division. There will not be Divisions on the other new Clauses.

Mr. Leslie Spriggs: On a point of order, Mrs. Jeger. I have tabled an Amendment to new Clause 4. Am I to understand that you will call my Amendment?

The Temporary Chairman: I am sorry to inform the hon. Gentleman that his Amendment has not been selected.

Sir G. Nabarro: Further to that point of order. Although the hon. Gentleman's Amendment is not selected, is not it the fact, in deference to the wishes of the hon. Gentleman, that my new Clause which seeks to reduce purchase tax from 22 per cent. to 20 per cent. also covers pet foods, which at present stand at 22 per cent.? Therefore, will not the hon. Gentleman be able to make his speech on my new Clause?

The Temporay Chairman: The Chair is not concerned with the wishes of either hon. Gentlemen. These are matters for debate.

Sir G. Nabarro: I simply wanted to put you right.

Mr. Jenkins: The effect of the Clause would be to reduce all purchase tax rates: that which at present stands at 13¾ per cent. to 10 per cent., that which at present stands at 22 per cent. to 15


per cent., that which at present stands at 36⅔ per cent. to 30 per cent., and that which at present stands at 55 per cent. to 50 per cent.
I have calculated that the direct cost of these reductions, if it were assumed that there were no change in the volume of goods purchased, which is clearly a false assumption, would be £315 million. But, by what cannot be an absolutely accurate calculation of the cost, allowing for certain elasticities of demand and allowing for different ones at different rates, I estimate the cost at £207 million. Therefore, the cost on the less likely assumption would not be more than the cost of the S.E.T. cut, which is £290 million, and, on the more likely, that it would be a little less than the S.E.T. cut.
I mention this in relation to S.E.T. because, as the Committee will be aware, we on this side have taken the view throughout our discussions on the Budget and on Second Reading that, given the right hon. Gentleman's Budget judgment, he would have done better to have proceeded against purchase tax rather than against S.E.T. I shall explain the main reasons why we take that view. First, the effect would have been far greater on prices. The effect of the Clause on the retail price index would be 1·2 per cent. The effect on the consumer price index would be about 1 per cent., and this must be admitted to be a slightly more valid basis of comparison if one is pursuing the S.E.T. argument, because clearly one must look at the consumer index to see the full effect of S.E.T., since this includes services to a greater extent.
On the other hand, it appears that the price effect of the S.E.T. concession can be varyingly calculated at between 0·3 per cent. and 0·6 per cent., according to the assumptions that one makes about how much of the reduction is passed on directly in price reductions, how much is used to increase profit margins, and how much is used to increase employment. But all three effects cannot take place to the full extent at the same time and, to the extent that the latter two effects take place, the effect of the S.E.T. cut is likely to be nearer 0·3 per cent. than 0·6 per cent.
There is no doubt that, on any assumptions, the effect of a slightly cheaper cut in purchase tax on prices would have been substantially greater than the effect of the S.E.T. cut which the Chancellor of

the Exchequer announced. There can be no doubt that a direct effect on prices would be most beneficial from the point of view of one of our major problems and is bound to be a factor to be taken into account in deciding whether the Chancellor of the Exchequer proceeded in the right direction.
Secondly, the effect of a cut in purchase tax as opposed to a cut in S.E.T. would have been a fairer one. It would have helped more those at the lower end of the scale than the S.E.T. cut. It cannot be denied that a cut which would have been somewhat fairer is badly needed in the general complex of this Budget.
I do not want to exaggerate this point. I hope that I never exaggerate. The make-up of S.E.T. is such that, assuming that the full 0·6 per cent. were passed on in price reductions, which is a big assumption, since this applies both to distribution and all the other industries concerned, about 0·3 per cent, would come from distribution and about 0·3 per cent. from the other industries affected, broadly speaking, the service industries.
The effect of the 0·3 per cent. applied to distribution, from a distributive point of view, would be no different from that of purchase tax. On the food side, it might be regarded as being marginally less regressive. As for the other 0·3 per cent., I have no doubt that that would be substantially more regressive than a cut in purchase tax, because services grow strongly as a country gets richer. One has only to look at the extent to which national income is made up of services in different countries and compare the position in a poor country with that in the United States to see that that is true of individuals or groups of individuals in any country.
Purchase tax is mildly progressive. In other words, one pays in purchase tax a very slightly higher proportion of one's income after direct taxes as one's income increases. According to Economic Trends, the percentages move about in a fluctuating way without any clear pattern from about 2·4 per cent. to 2·9 per cent. between £600 and £2,500, and then up to about 3·2 per cent. when one gets over £3,000. That is why I say I do not exaggerate the effect.

8.0 p.m.

I have no doubt that a cut in purchase tax as opposed to the cut in S.E.T. would


not to any overwhelming extent but to a significant extent, apart from the price effect with which I have already dealt, be more beneficial to those at the lower end of the scale.

I turn from that to the speed of the impact. This is why I did not use the word "impact" but the word "effect" at an earlier stage. These calculations of between 3 and 6 per cent. will apply to their full extent only after two years. The purchase tax cut would have applied almost immediately it was announced. It would therefore have had a different degree of impact, apart from the issue of the size of the reduction which could have been effected.

This bears directly on what I believe to be one of the weaknesses of the Budget measures concerning the economic needs of this country. The Chancellor chose to proceed in such a way that the limited concessions which he gave could not come into effect until a substantial time after the Budget, although it was already clear that there was a great deal of unused capacity. It has become clear since that the Budget base was falsely high and that the economy was more depressed in the late winter and early spring months than the Chancellor knew when forming his Budget. That cannot be denied. I do not blame him. It is a hazard with which a Chancellor has to operate. It is also the case that, allowing for seasonal adjustment, unused capacity is continuing to grow.

When we ask what is to be done about it, as the Home Secretary in his capacity as acting Prime Minister was asked today and as the Chancellor was asked on Tuesday, we are constantly told that we must wait for the right hon. Gentleman's Budget measures to have their effect. It is his own fault that we have to wait for them to have their effect. He could have chosen Budget measures which would have had their effect immediately and could have been far more expertly tailored to the needs of the situation.

There is a further difficulty. The Chancellor cannot know with certainty how strongly those Budget measures will come through. It is not always easy to estimate these things with accuracy. Furthermore, he cannot know with what kind of situation he will be confronted when they do

come through. He may at that time be confronted with a more deflationary situation than at present.

This may be so from three points of view. There is no indication of any pickup in investment. One merely has to look at the sorry tale emerging from the machine tool industry to realise how serious the situation is. Exports in volume have been very disappointing recently. From a price point of view, the position has been somewhat disguised, but in volume the situation is disappointing. I think that it is below the Chancellor's hopes and expectations. I hope that this trend will alter. It has not yet altered, and I doubt whether there is any immediate sign of it doing so.

What about consumption? The Chancellor tells us—I do not know with how much conviction, but this is what he said at a dinner a night or two ago—that the rate of increase in the level of wage settlements and earnings is being reduced. I expect that to some extent this was based on taking a slightly exceptional month. However, there may have been some reduction. Indeed, it is possible that earnings are not increasing significantly faster than prices. It is even possible that they may be increasing a little more slowly. But there is no increase in real earnings going on at the moment. If so, this is extremely significant from the point of view of the management of the economy.

If the Chancellor is right in his predictions and he is able to reduce the level of wage increases further, and if he is not going to take any special measures against prices—price increases will go on, whatever happens to wage increases, I should say for the rest of the year at a rate of nearly 10 per cent.—we may get a fall in real earnings during the rest of the year. This is one difficulty of moving from a situation in which both prices and wages are moving at a fast rate. If that happens a strong new deflationary factor will come in on top of the great deal of unused capacity and unbalanced on present indications by any support either in investment or exports.

This is a difficult situation. What this adds up to is that, both on the internal merits of the alternative methods of tax reduction and on their relationship to the needs of the economic situation, the Chancellor would have been better


advised to have accepted something along the lines of the new Clause at the time of the Budget. I believe that the situation is such that, by means of the regulator, perhaps, he will have to do something like the new Clause seeks to do within the next six months. Therefore, it would have been better if he had done this before—it would be better if he accepted the new Clause in the Finance Bill—but he has been prevented from doing this by his doctrinal party attachment to cutting S.E.T., which is a far less suitable weapon.

Sir G. Nabarro: It is always a pleasure to follow the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins). If I do not deal immediately with some of his comments, it is only that I wish to follow my own line and allude to what he said as opportunity permits.
I have set down two new Clauses concerning purchase tax matters, both of which are vehicular in character, in that they will enable me to range over a wide area of indirect taxation.
My attitude to purchase tax reductions in the Budget could not possibly have been stated earlier than on Budget Day, when the Leader of the Opposition was responding to the Budget and made a reference to purchase tax. I should like to quote the exchange which then took place. The Leader of the Opposition was saying: "The hon. Gentleman"—referring to myself—
must be very disappointed about purchase tax today.
Sir G. NABARRO: Splendid stuff, Harold.
Mr. WILSON: There is not even a reduction of purchase tax on the red, white and blue boxer shorts in which, so we read, he sleeps in bed.
Sir G. NABARRO: I want to say only one sentence to the right hon. Gentleman.
I pause there, because here are the pregnant words:
I prefer a promise of an abolition totally of purchase tax in 1973 to a slight reduction in it now, and I am wholeheartedly in favour of a general sales tax or a value-added tax—it is the same thing—which I have always advocated."—[OFFICIAL REPORT, 30th March, 1971; Vol. 814, c. 1403–4.]
I am therefore using these two new Clauses as a vehicle for drawing attention today to certain things which I think my right hon. Friend ought to do before 1973 when we switch over completely to the continental system of a value-added tax.
It is no part of my speech today to debate the merits and demerits of a value-added tax, save only to say that, totally without any originality myself in this sphere, I have always advocated a general sales tax or a value-added tax manipulated in a particular fashion to suit our national economic requirements, but largely because a general sales tax or a value-added tax recognises a taxation principle of my own which I have always been anxious to advocate in these circles. It is that in times of peace there is no such thing as a luxury manufactured article. All manufactures contribute to two things: first, the employment of our people and, secondly, the export of British manufactured goods.
It is equally as important to be able to export those articles which are presently taxed at 55 per cent. as to export those articles which are presently taxed at one quarter of that rate, 13¾ per cent. The Socialist idea is that we must try to sort out all the manufactured articles into those which are very luxurious, and tax them at 55 per cent.; those which are not quite so luxurious, and tax them at 36⅔ per cent.; those which are a little less luxurious, and tax them at 27½per cent; those which are slightly less luxurious again, and tax them at 22 per cent.; and those which are not so luxurious, taxing them at 13¾ per cent.; and then let off a whole range of articles, saying that they are essentials and so should not be taxed.
Thus, when my right hon. Friend the Prime Minister buys himself a new oceangoing racing yacht at £20,000, it is not taxed. If a constituent of mine buys himself a plush, expensive caravan costing £2,000, to tow behind his motor car, it is not taxed. But if he prefers to spend his money on a motor car it is taxed at 36⅔ per cent., and if he is so unwise as to prefer a camera it is taxed at 55 per cent., and so on through the whole gamut of manufactured articles.
There is no logical justification for that range of rates. Some faceless boffin and bureaucrat reposing within the fastnesses of the Treasury decided, on an obscure and far-distant date at some time since 1940, when this iniquitous form of taxation, purchase tax, was introduced, that a particular rate should apply to a particular article. There is no logical justification whatever for any differential rates.
But once we are on to a value-added tax in mid-1973—save only perhaps food, save only perhaps fuel and transport, save only these fundamental and critically important commodities or such as perhaps minerals—this type of indirect taxation will apply equally across the whole field of manufacturers so I am led to believe, though it is not beyond the bound of possibility that differing rates of value-added tax may be applicable. I pray that they will not be, that in pursuit of the principle I enunciated a few moments ago all manufactured articles that are taxed will be taxed at an equal rate.
My new Clause 2 is vehicular in Parliamentary purpose and vehicular literally, being to reduce purchase tax from 36⅔ per cent. to 33⅓ per cent., and most of that category comprises motor cars.

Mr. Barber: Vehicles.

Sir G. Nabarro: I am sorry. I was referring to the Clause earlier as vehicular. My right hon. Friend, as always, is perfectly right. Vehicles are concerned.
I propose to talk about motor cars for a few moments. It is significant that the expected level of new registrations of motor cars during 1971 will be about 1,190,000. As we are only just over a third of the way through the year, we cannot make a precise estimate, but that figure was given to me by the Society of Motor Manufacturers and Traders this morning, and it is most likely to be accurate. It is significant that the registration of new cars in 1964 was 1·19 million, so the level of new registrations seven years later will be the same as it was in 1964. Notwithstanding the vast increase in manufacturing capacity for vehicles in this country, notwithstanding the great improvement in production techniques for vehicles in this country, the output is the same in 1971 for the home market as it was in 1964. I do not dispute that there has been an increase in exports.
The best estimate we can make is that the motor industry of Britain, our biggest and most important manufacturing industry, is working today at about 85 per cent. of capacity. This is having a salutary and inflationary effect on costs of production. If an industry is working at only 85 per cent. of production capacity, it follows that the cost per unit rises.

Mr. Taverne: I cannot understand why, in view of what he has now said, the hon. Gentleman described the effect on costs as salutary.

Sir G. Nabarro: Salutary, because it is significant, because it is important, striking.

Mr. Taverne: The hon. Gentleman does not understand what "salutary" means.

8.15 p.m.

Sir G. Nabarro: I said "salutary". I do not think that that is wrong.

Mr. Taverne: "Salutary" means "healthy".

Sir G. Nabarro: I am sorry. I bow to the hon. and learned Gentleman's great erudition, and I substitute "significant". The word I used does not mean healthy in that context.
Perhaps the hon. and learned Gentleman will apply himself to the point I have made, which he cannot fail to understand. Production at 85 per cent. of capacity is likely to drive costs up above the true economic level. Were we operating at 100 per cent. production, the cost per unit would be commensurately lower, at a time when raw material prices, including those based on steel, are driving remorselessly upwards, and when there have been so many inflationary wage settlements in the motor industry. The time has now arrived for my right hon. Friend the Chancellor to examine the restrictions on production which are thrust by artificial, Government action on the motor industry.
The first of these are the draconian hire-purchase restrictions impressed by the right hon. Member for Stechford directly after the devaluation of sterling. They have not been changed since. They are still at the same level. [Interruption.] The right hon. Gentleman is contradicting me, but that is so.

The Temporary Chairman: Order. The Question before the Committee has nothing to do with those restrictions.

Sir G. Nabarro: No, Mrs. Jeger. It was only a passing reference to one of the two major factors—the draconian restrictions put on the industry in the form of hire-purchase restrictions.
The second has been the continuous increase in the rate of purchase tax on cars since the Labour Government came to power in 1964. The rate of purchase tax on cars was then 25 per cent. It was brought down to 25 per cent. on 5th November, 1962, by my right hon. Friend the present Home Secretary. The Tory Party had progressively reduced purchase tax on motor cars all the way along the line from 1951 to 1962, and when it left office in 1964 we had the illustrious record of having reduced the rates from 66⅔ per cent. to 25 per cent. The Labour Government then drove them up between 1964 and 1970 to 36⅔ per cent., where they stand today. Not only did the Labour Government do that to purchase tax on cars, but in six years they doubled the amount of revenue from purchase tax. In 1963–64 it was approximately £600 million. When the Labour Government left office during the tax year 1970–71, the revenue from purchase tax was £1,260 million. Part of that might be attributed to expansion of production, but most largely it was due to a progressive increase in all purchase tax rates, and here I pause to deal with the speech of the right hon. Member for Stechford, who would have preferred a reduction of purchase tax to a reduction of S.E.T. I should not.
I should prefer a reduction in S.E.T., because the whole of that money comes off the prices in the shops. That is not necessarily the case when purchase tax is reduced. We have evidence of that from many leading retailers. I shall not go through all their names, but they range across the whole field of retailing organisations which have announced important reductions in retail prices following the halving of S.E.T., to be effective from the first week of July, and I congratulate my right hon. Friend in his judgment on that important matter.
I want relief now, in the sense suggested in one of the new Clauses, for this major group within the 36⅔ per cent. tables; namely, motorcars. Not only is the motor industry working very much below capacity, but unemployment in the Midlands is pretty bad. Many hon. Members will have read the leading news story on the front page of The Times today by the economics editor, Mr. Peter Jay. Under the heading,

Steep increase in Midlands unemployed points to massive national total",
he writes:
Unemployment is still rising fast.
But this afternoon it was announced that there was a fall in unemployment. Mr. Peter Jay is very inaccurate in the national setting, but he is strictly correct when he draws attention to the fact that unemployment has been rising continuously in the manufacturing areas of the Midlands during the last six to nine months.
Birmingham and Coventry are the hub of the motor and vehicle industry of Britain. Last year the industry exported more than £1,000 million worth of motor cars, tractors, commercial vehicles, components and spares. This increase in unemployment in the Midlands area spills over into Bromsgrove, where a by-election is in progress, and will undoubtedly be reflected in the results of the polls shortly, into South Worcestershire, which is partially a dormitory constituency for motor industry and other workers. There is real apprehension in these Midland industrial towns, notably Birmingham and Coventry, about the trends of unemployment and the fact that it is urgently necessary to take unilateral action to assist the motor industry and reverse these trends.
I suggest that action should be taken unilaterally and urgently, first, by following the recommendation of the Crowther Committee, which was total abolition of hire-purchase restrictions, and, second, by reducing purchase tax on cars, certainly to 33⅓ per cent., as one of my new Clauses suggests, but preferably down to 25 per cent., which is what my right hon. Friend the Home Secretary did, though from a higher level of tax, on 5th November, 1962.
I pass, now, to two items of special pleading, because the only way that I can make this appeal to the Chancellor is through the method employed of a general new Clause to reduce purchase tax rates. I ask my right hon. Friend to do something about toothpaste, and I refresh him, as he, with his splendid teeth, refreshes his mouth morning and night with dentifrice.
Some years ago we persuaded a Tory Chancellor of the Exchequer unilaterally to relieve toothbrushes of purchase tax. They were put on a nil rate of purchase tax in the same fashion as we relieved


pianos and put them on a nil rate—pianos to save our industry from German competition, and toothbrushes because they would help the dental health of the nation, accompanied by measures of fluoridation of our water supply over many years. I shall not stray into matters of fluoridation—that is a highly controversial topic—but I have always been a powerful supporter of fluoridation or dental health and preserving youngsters' teeth. The fact that I have survived to my ripe age with a head full of good teeth is no doubt due to vigorous brushing with purchase-tax-free toothbrushes, and the recognition of the merits of fluoridation. I hope to add to those important attributes of dental health a capacity to persuade my right hon. Friend to deal unilaterally with dentifrice.
It really is preposterous that the cause of dental decay, most largely, and especially the deteriorated and deteriorating condition of children's teeth—namely, the consumption of excessive quantities of sweets—should be taxed at 22 per cent., whereas dentifrice is taxed at 36i per cent. That is called preventive medicine, if my right hon. Friend takes the irony. He would make a great political impact on this country, even greater than he has achieved so far, if he unilaterally relieved dentifrice from the 36⅔ per cent. rate of purchase tax.
8.30 p.m.
I am sure that my right hon. Friend, in the course of his wide reading on matters of such importance, will have studied the professional journal, The Dental Practitioner. I quote from the issue of November, 1969, when dealing with an analysis carried out of the dental condition of British competitors at the Olympics:
Altogether, the results of examination were very disappointing and the dental state of those of our team who were seen, was considered to be very poor indeed.
On a later page my researches and reading reveal the following dental pearl:
One must conclude that before the Olympics, medical officers were not of the opinion that dental fitness was of any importance with regard to the health or the prowess of team members.
If Olympic athletes have bad teeth, what hope is there for us, or our children? I will not pursue that matter further.
The Chancellor should in the whole field of purchase tax look at this one tiny item. It is the only one on which I plead for a total abolition and for getting rid of a 36⅔ per cent. purchase tax. I will tell my right hon. Friend how to do it. He should stop classifying dentrifrice as a cosmetic and should start classifying it as a non-perfumed detergent or soap. It would be equally sensible because, since the latter category carries no purchase tax at all, he could effectively carry out the transformation and, by Statutory Instrument, put it through the House of Commons at an early date. Loss of revenue would be small.
Finally, a word about the purchase tax on foodstuffs. The former Chancellor of the Exchequer, the right hon. Member for Stechford will recall having made a speech at Aberystwyth in the summer of 1969 when he impugned the Tory Party and said that we were the only party that wanted to put a tax on people's food. If the right hon. Gentleman does not remember it, I will send him an extract from the Sunday Times.

Mr. Roy Jenkins: I remember the occasion though not the words since the hon. Gentleman, as usual, is misquoting.

Sir G. Nabarro: I will send the right hon. Gentleman the extract. I thought his memory was so good that he would recognise the accuracy of the words.

Mr. Jenkins: I cannot remember inaccurate words.

Sir G. Nabarro: I will remind the right hon. Gentleman, after the debate, of the accuracy of my words, though I do not purport to quote him precisely. He impugned the Conservative Party as anxious to tax the people's food, totally forgetting that he himself through S.E.T. imposed a swingeing tax on the people's food and raised the price of it at every stage of distribution from the port of entry when imported or from the farm gate when home produced, until it passed over the counter in the grocers' shop to the housewife. When we get on to V.A.T. and abolish S.E.T. there will be a significant reduction in food prices
There is a category of food, including animal food stuffs, which I feel the Chancellor should deal with. It is an important


category covering a large number of items, and we have to blame the former Chancellor of the Exchequer for putting a tax on the great majority of food stuffs. Moreover, the former Chancellor put a tax on all pet foods in 1969. He raised the price of pet foods by about four old pence in two shillings of the old currency or about 17 per cent., which affected about six million households in the country. But in the same category we have a heavy level of purchase tax, some 22 per cent., as in the case of pet foods, which is levied on soft drinks, confectionery, on all kinds of sweetmeats, imposed in 1961 by a former Conservative Chancellor of the Exchequer who is now the present Speaker of the House of Commons. To tax these food stuffs directly with a 22 per cent. rate of purchase tax is in my judgment wholly bad.
If anybody has any difficulty in defining what is a food stuff, whether for human consumption or for animal consumption, I give him in reply no more difficult definition than a comestible that finds its way down the throat and gullet into the tummy of the recipient, human or animal. Anything that does not follow that definition is not a food stuff. It may be argued that certain medicines go into the tummy but large numbers of medicines are not taxed. Only certain proprietary medicines are taxed. But I feel that it is wholly bad to tax either human food or animal food. This is why I greatly prefer my right hon. Friend's recourse of cutting in half S.E.T. on 5th July next and promising to get rid of the remainder in the summer of 1973. I hope that V.A.T. will not cover any kind of food either for human or for animal consumption. I do not wish to go too far on that matter since the hon. Member for St. Helens (Mr. Spriggs) has set down an Amendment about pet foods and he will be perfectly capable of deploying detailed argument on that. I believe that we should seriously study in the next few months a means of getting rid of these food taxes.
If I may summarise, I ask my right hon. Friend for early and dynamic action on the motor industry with special reference to motor cars in the sense I have suggested. Secondly, I would like to see before the Summer Recess total abolition of the purchase tax on toothpaste. Thirdly, I would like my right hon. Friend to deal with taxation on food

stuffs for both human and animal consumption and give at least an undertaking that all food will be outside the scope of V.A.T. when it is introduced.
I congratulate my right hon. Friend on his measures in connection with indirect taxation. He has taken several hundred million pounds off indirect taxes for the first time in seven years. Whenever I hear any bleats of dissatisfaction about my right hon. Friend's Budget judgment compared with his miserable predecessor's, I always feel tempted to reply, "My right hon. Friend, for all his faults, has achieved something which no British Chancellor of the Exchequer has achieved this century, something in the order of £750 million in a single Budget off the taxes." That is both salutary and significant, and I warmly congratulate my right hon. Friend.

[Miss QUENNELL in the Chair]

Mr. Spriggs: I am pleased to have the opportunity of following the hon. Member for Worcestershire, South (Sir G. Nabarro), because he touched on the question of purchase tax on pet foods, dentifrice and tooth brushes. Each of the points he raised deserves mention, and I trust that the Chancellor of the Exchequer took due note of them.
The Minister of State will remember answering, on behalf of the Chancellor of the Exchequer, correspondence from me early in the year. I will remind him of that correspondence later, but I want to draw to his attention the reaction of the Stamina pet food firm in my constituency of St. Helens. He will remember that I sent to him diagrams showing what had happened since the imposition of purchase tax on pet foods, for which my right hon. Friend was responsible. Between December, 1969, and March, 1970, a serious decline commenced in the St. Helens factory. The number of employees fell in the first 12 months from 386 to 257. Before the imposition of purchase tax, six shifts were operating. Since then, 50 per cent. of those shifts have been cut out altogether.
The Chancellor of the Exchequer will understand the concern of my constituents and myself about the severe and growing unemployment in the Greater Merseyside area. I have today obtained from the Department of Employment the


latest unemployment figures. There are 1,748 men, 274 women, 91 boys and 41 girls signing the register for work, making a total of 2,154 people out of work, a percentage of 4·7.
My constituents and I feel that, since the imposition of the 22½ per cent. purchase tax has had this bad effect upon the employment opportunities in the one pet food firm in the town, something should be done.

The Minister of State, Treasury (Mr. Terence Higgins): I well recall the correspondence and I studied the diagrams which the hon. Gentleman sent with great care. However, my memory fails me on one point. Would he refresh it and say whether, in the period to which he is referring—which, perhaps, he would define—there were any figures for what happened to the output of pet food, as against the employment figures.

8.45 p.m.

Mr. Spriggs: As the hon. Gentleman knows, this particular firm produces Paws cat food and Stamina dog food, which are probably the best animal foods in the country. I believe in testing these foods myself on the animals for which I am responsible. I find that by using Stamina dog food I have one of the finest dogs in Britain. Her coat shines like black satin and she is as healthy a dog as one could ever see and is full of vigour.
I come to figures to which the hon. Gentleman referred. Prior to the imposition of the 22 per cent. purchase tax, the average annual increase in production was about 6 per cent. or 7 per cent. In the cheaper group, from the date of the imposition of the tax, that percentage increase levelled out to a 1 per cent. increase in the first year. But the premium sector of dog food production saw a serious decline from a 12 per cent. increase in the previous year to a 13 per cent. decrease in the following year. My constituents made an impassioned appeal to me to put the case to the Chancellor of the Exchequer, because this small industry had been thriving until the imposition of this tax. It had been able to increase shifts and productivity right up to the point when the imposition of taxation made itself felt upon the consumer.
The Minister of State will recall that there was another diagram relating to Paws and Stamina, which are brand names. I have a diagram here, which he will have read carefully, which shows the number of cases, in thousands, which were sold up to the time of the imposition of the purchase tax, and those sold at present. In the premium sector of the canned dog food market, there was a dive in the orders from 6,900 cases to 6,400. Since then, there has been a further serious decline.
On 8th February I wrote to the Minister drawing his attention
…to the tax imposed on the higher quality dog food known by its trade name 'Stamina' and 'Paws', which now stands at level of 22 per cent.
There are five reasons for my doing so and I list them in order of priority as follows: (1) significantly slowed down total market growth; (2) caused an absolute decline in the quality sector of the market; (3) has more significantly affected Stamina products than others because of market size; (4) resulted in a reduction in numbers employed at St. Helens; (5) reduced the number of shifts worked at the factory.
And whilst I am aware that the Chancellor is not directly responsible for employment, I feel sure he is concerned with the present trend in the North-West Region.
The management of McDougalls Foods Ltd. have quite rightly drawn my attention to the step decline in job opportunities at their St. Helens factory since the imposition of the 22 per cent. purchase tax in 1969. And during the last few months, many retired people have drawn my attention to the mounting problems of feeding their pets, and guide dogs for the blind are a necessity in several cases brought to my notice, and here again, I found the increased cost of keeping a working dog bearing heavily on those least able to meet the increased costs".
After referring to the graphs which I enclosed, I said:
I hope, at the very least, the Chancellor will be able to reduce the purchase tax on pet foods to the level of household goods at 13¾ per cent.
Had I been able to move my Amendment, I would have argued for nil per cent.
It is wrong to tax food, and pets become a part of the family. I know poor people who, because they cannot afford to buy the proper foods for their pets, give them part of their own food. It is not possible for the poorer section of the community to go to the butcher and appeal for scraps. Most of them cannot or dare not go to the butcher now even for themselves, because of the price of


meat. It is more difficult still in the towns than it is in the country.
When I considered the guide dogs for the blind I found that even those who were employed were on some of the smallest incomes in the country. The heavier breeds like alsatians and golden retrievers are costly to maintain. For those who live alone, their dogs are literally their best friends. Many people rely on other animals and birds for company. The Chancellor would be doing a great service for both the human race and animals if he took this step.
It was easy in the old days for people to buy scraps. Today only those who are wealthy enough to buy sides of beef, or the less wealthy who nevertheless buy meat at the weekends and during the week, can afford to keep their pets in food.
There are 36 hon. Members who have factories in their constituencies making or concerned with pet food. If I mention St. Helens and the Stamina food industry the Committee will know the size of the companies I have in mind. I will not mention other firms because the hon. Members concerned are not present. Some firms are having to declare workers redundant, and this particularly applies to the North-East Coast.
The hon. Member for Worcestershire, South frequently calls for a reduction in purchase tax. I appeal to the Chancellor to take this opportunity to remove purchase tax from the commodities about which I have been speaking. The result would be reflected in the happiness of, in particular, the elderly and the blind, and he would also help to maintain job opportunities in many parts of the country.

Mr. David Madel: It is essential to remember when discussing proposed cuts in purchase tax the general economic background against which the Bill has been framed. Time and again my right hon. Friend the Chancellor of the Exchequer has called for a substantial reduction in the level of pay settlements as a prerequisite for faster economic growth, and only yesterday we were informed that pay settlements in the past few months had been levelling off. The danger is that unless further action, rather than exhortation, is taken by the Government, pay settlements will start to drift upwards again.
We are now being bombarded with pro and anti-Common Market propaganda, one piece of which has had some effect in this country. It compares wages here with Common Market wages and it merely confirms in many people's eyes that we are a relatively low wage economy and that, therefore, the people who are bargaining for higher wage increases are determined to do something about it.
Every post-war incomes policy except the statutory one has failed because prices drift upwards while the Government make themselves hoarse urging people not to ask for increases that are too large. I heartily endorse what my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) said in dealing with the need for cuts in purchase tax in relation to the motor industry. Quite rightly, he paid great tribute to its fine export record not only in finished products—cars and trucks—but also in spare parts and engines. These make a substantial contribution to our export performance. Cutting purchase tax soon would do two things which would have an important effect on the economy.
First, production in the motor industry would be boosted. My hon. Friend was right to hint that the motor industry is becoming exasperated to the nth degree by restrictions under which it has laboured for so long. Although hire purchase is not dealt with in the new Clause, he touched on the subject and underlined the fact that a loosening of hire purchase restrictions would also make a substantial contribution to boosting production. If we do make purchase tax cuts soon, it will be of tremendous help to unions and employers when considering the level of pay settlements, quite apart from the extra spending power which would go into the economy and which must lead to the faster and greater economic growth without which we shall not get a higher real standard of living.
The danger in this country at present is that so many of the wise and imaginative proposals in the Budget are going to be forgotten unless we get a quick downward drift in the total number of unemployed. There is great national concern about this. My hon. Friend the Member for Worcestershire, South mentioned the Midlands, which hitherto has had virtually no unemployment.


There is rising and tremendous national concern about the increase in unemployment in certain areas. This could be cured quickly if we were to use the spare capacity that there is in many industries.
If my right hon. Friend the Chancellor of the Exchequer cannot cut purchase tax now, I hope he will soon be able to. We have heard much talk about the regulator. Since it was introduced in 1961, it has been not so much a regulator but a sort of "upward-ator". It has not been used to reduce taxes but always to put them up, while in the background the Government have been trying to get substantial reductions in the level of pay demands. That reduction in pay settlements will come about more quickly if we have purchase tax cuts soon. Unless we can get our manufacturing industries to run at much nearer full capacity, then our dream of economic growth will not become a reality.

Mr. Dalyell: I want to follow exactly on the issues raised by the hon. Member for Bedfordshire, South (Mr. Madel). I hope I might be forgiven for making the observation that a number of us have lived with unemployment problems for a long time. I have done so, if not directly in the east of Scotland, then certainly in the west of Scotland, just as my hon. Friend the Member for Gateshead, West (Mr. Horam) has lived with them in his part of the country. We might be forgiven if we reflect that there might have been more understanding of our problems from certain right hon. and hon. Members. The hon. Member for Bedfordshire, South is new to the House, and I do not point the finger at him, but it is revealing to some of us that when the first sign of unemployment hits south Bedfordshire or—dare I say it?—South Worcestershire, I will not say that there is squealing but, understandably, the hon. Members concerned get hot under the collar. I say to those hon. Members, gently, that they should imagine what it has been like for some of my hon. Friends who represent areas with levels of unemployment of ten, 11. 12 or 13 per cent. That is the sort of situation which parts of our country find themselves in.
Continuing specific points before coming to the general economic issue, I would like to talk about not the motor car

industry itself, because I have no locus to do so, but certainly the motor vehicle industry, because I represent the huge British Leyland factory for trucks and tractors at Bathgate. In many ways this has been a remarkably successful factory in the recent past. It has an enormous order from India which will keep part of the factory going for some time. To get such orders, there must be a fairly flourishing home market.
9.0 p.m.
The Minister of State should pay heed to the assertion by my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) and by some hon. Members opposite that we look in the fairly immediate future to have some relaxation to enable the home market for the motor industry to produce more. I do not think that this will have any great effect on wage inflation as such, because all that has been said previously about unit costs is only too true; and with greater production unit costs could come down.
I return to the point made by my right hon. Friend the Member for Stechford that, if there had been a purchase tax change rather than a change in S.E.T., the effect would be quicker. Timing is everything in these matters. I do not pretend that any of my right hon. Friends or indeed any Government Minister can control this very delicate instrument that is the motor industry with any degree of precision. However, the notion that it can be done through S.E.T. and the like is very far fetched. There is no substitute for purchase tax changes.
While we are on particular changes, I should like to grind an axe. As the Minister of State knows, there was a delegation to him led by my hon. Friend the Member for Huddersfield, West (Mr. Lomas) and the hon. Member for Shipley (Mr. Fox) on the question of school books. Many of us have felt for some time that the tax on school books was not only glibly a tax on knowledge but a very undesirable tax in itself. The situation has been made much worse because the local authorities are under an unprecedented squeeze.
To say that it is up to the local authorities to help the publishers, to provide more books, and to pay higher prices is not very realistic; because when most education budgets are scrutinised the fact


is it varies enormously from authority to authority. The allocation of school books is one of the matters that are cut.
This is highly undesirable, because it is good in itself that we should develop at school the habit of book ownership. Those who come from better off homes know only too well the value of having books in the home and, indeed, the value of the possession of books. It will not quite do just to say that books can be handed out at school libraries. A school, to be effective, must have a vast stock of books. Indeed, I believe that books for children should be cheap, so as to get children into the reading habit.
This delegation went to the Minister. We did not have great satisfaction. I should like if possible some comment tonight. If that is unrealistic and the officials who are up to date on what has happened are not present, I should like a letter on it at the convenience of the Treasury Minister.
I return to the speech of my right hon. Friend the Member for Stechford. The alternative is S.E.T. Throughout I have been a strong supporter of S.E.T. for a number of reasons, partly that it was easily the cheapest tax to collect. This doctrinaire promise to get rid of S.E.T. just because it was superficially unpopular was not very sensible in terms of Revenue staff, because it has been far easier to raise a given amount of money by S.E.T. than by any other means in our fiscal history.
In addition, I should like to know the extent to which the claims of that happy March day seven weeks ago are likely to be realised or look like being realised. I agree with the Chancellor of the Exchequer that not everything can be done at once, but let us reflect what was said to tremendous cheers when the right hon. Gentleman announced that S.E.T. would be halved:
This reduction of S.E.T. by one half will help in the fight against inflation, for it will have a direct influence on prices".
It is reasonable to imagine that the anticipated halving of S.E.T. would have some effect on prices. I am a fair man, and I can see that a number of supermarkets have made cuts. But ask any housewife whether there have been cuts across the board, and one gets a pretty dusty answer. I happened to be on political business in Southampton last

night. There is no doubt that Southampton's major issue is prices. I have not been to Bromsgrove. The hon. Member for Worcestershire, South (Sir G. Nabarro) seems to be very concerned about Bromsgrove. Shall we find from the ladies of Bromsgrove whether they think there has been any effect yet on prices? If the Government say that we must wait until 5th July and that there will be an effect then, we shall certainly wait until 5th July. However, if the claim is likely to be substantiated in reality, I assume that it ought have begun to show by now. I should like a Treasury comment on any trends which it thinks show that the Chancellor's hopes will be fulfilled.
The right hon. Gentleman went on in March:
This reduction in S.E.T. will also cut by one half, or upwards of £100 million, the average amount outstanding of the forced loan from manufacturing industry to the Government, which arises from the arrangements for collection and repayment. In this way it will strengthen the liquidity of companies in manufacturing as well as in service industry and so help with the financing of working capital and investment.
In all our previous debates on Finance Bills, we have heard squeal after squeal from hon. Gentlemen opposite that the liquidity situation of our major companies was getting worse and worse. When I begged leave to doubt whether that could be made as a blanket assertion across British industry, and hesitantly said that some companies were in a fairly good liquidity position, I was rebuked by hon. Gentlemen opposite, especially by the hon. Member for Cities of London and Westminster (Mr. Tugendhat), and told that the liquidity situation was very serious. I ask the Treasury whether there is any sign that the liquidity situation has been affected by the decision on S.E.T. That is a direct question, and I await the answer.
The right hon. Gentleman went on:
In revenue terms, the net cost of the reduction in S.E.T. will be £290 million in 1971–72 and £245 million in the following year. In demand terms, it will play an important part in providing the additional stimulus which, as I said earlier, I consider to be necessary, although the effect on demand will be less than the revenue cost, and will build up gradually."—[OFFICIAL REPORT, 30th March, 1971; Vol. 814, c. 1396.]
Those of us who represent constituencies in central Scotland, Merseyside, or the


North-East of England want to know what is meant by "gradually". One of the alarming features is that, as far as any objective person can detect, there has been no stimulus.
That brings me back directly to the Clause. Surely a reduction in purchase tax would have acted as a stimulus. The halving of S.E.T. for purely doctrinaire reasons, as we see it, seems to have given no stimulus at all. If the Treasury thinks that we are being over-hasty, we can wait, but the 820,000 odd unemployed cannot. Therefore, I should like a precise statement from the Treasury on what is meant by "stimulus" and how gradually is "gradually". I believe that the dismantling of S.E.T. was a profoundly wrong move. It was pandering to doctrine in the worst possible way. An operation on purchase tax, such as my right hon. and hon. Friends suggest, would at least have saved some of those who can and want to work, but are unable to do so.

Mr. Parkinson: I should like to take up one or two remarks made by the hon. Member for West Lothian (Mr. Dalyell) about selective employment tax and, in particular, its effect on prices.
We have had a few illustrations—one must be truthful and say that they are but a few—of large groups of companies which have made cuts, of others which have promised to make cuts, and of a number of restaurants which had a special S.E.T. surcharge and have removed it, and so on. I hope that more will continue to do so.
I have knowledge of the food industry, because I acted as financial adviser to a group of cash-and-carry stores in the North and Midlands. The profit margin on which the food industry works is minute. A profit of 1½ per cent. is very good. But, like everybody else, it is under tremendous cost pressure. We shall not know just how much prices would have had to go up had S.E.T. not been cut. There is the positive sign from certain groups that there have been cuts, and there is the negative sign, which I believe is just as valid, that groups have been able to avoid putting up prices as a result of the cut in S.E.T.
One thing always puzzles me when I listen to hon. Gentlemen opposite talk of wage settlements. We heard no complaint

from hon. Gentlemen about the Ford settlement and the fact that Fords announced that their prices would have to go up as a direct result of increased costs. In other words, Fords said, "We cannot absorb the costs we are going to pass them on".
The negative sign that prices have not gone up by as much as they might have done is discounted by hon. Gentlemen opposite. It is less easy to prove that prices would have gone up had the tax not been cut. However, I am convinced that that is so.
We shall have to wait until the profits of the retail groups are revealed in 12 months to see whether I am right or whether hon. Gentlemen opposite are right. However, I am prepared to back my judgment and to bet the hon. Member for West Lothian that the profits of the retail groups, especially in the food and distributive industries, will not show a huge increase as a result of the cut in S.E.T. which one would expect if they had been keeping it for their own benefit instead of passing it on.
Accountants have had substantial salary increases over the last four or five years. One thing for which my profession is particularly grateful to right hon. and hon. Gentlemen opposite is that accountants have never been in such demand as during their period in office. S.E.T. has had reactions on our salaries bill, because we have had to absorb and still are absorbing substantial costs. We shall use our S.E.T. cut, because we have also benefited, to hold our costs, which, just like everybody else's, would have had to be put up. We shall not know what effect the cut has had until the financial results come out. I do not think that the hon. Member for West Lothian had any ground for saying that companies are profiteering as a result of S.E.T. We shall have to wait to see who is right.

Mr. Dalyell: This is a fairly powerful critique of the hopes and expectations raised by the Chancellor only seven weeks ago.

Mr. Parkinson: Not necessarily.

The Temporary Chairman: Order. I hope that the hon. Member will bring his argument back to the point before the Committee which concerns purchase tax.

9.15 p.m.

Mr. Parkinson: In the opening speech of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) the argument centred around the reason for the Clause calling for a cut in purchase tax, and we were told that my right hon. Friend the Chancellor had made an error in not cutting purchase tax and cutting S.E.T. That was the basis of most of the opening speech, and S.E.T. was almost the basis of all the remarks of the hon. Member for West Lothian (Mr. Dalyell).
Another reason why we have cut S.E.T. is that we explained to the country in June that we felt that it was an inflationary tax. We made no secret of our intention to cut it because we thought that it was very damaging. Our proposal to cut it was universally accepted. We felt ourselves bound by our pledge, and we had to keep that pledge. If the hon. Gentleman is surprised that we cut S.E.T., he has been suborned by the failure of his right hon. and hon. Friends to keep their promises to an extent that I find surprising. We were committed to do it, and we did. But I am not allowed to say any more about S.E.T.
I particularly object to the new Clause because once again right hon. and hon. Members opposite are putting forward a very simplistic, slightly panic measure. My right hon. Friend the Chancellor only eight weeks ago gave his Budget judgment. There have been assertions from hon. Members opposite that he was not right. It was made clear in that Budget judgment that my right hon. Friend was laying down long-term guidelines, yet after eight weeks we are being asked to abandon it and do as the previous Government did, with mini-budgets, adjustments right down the line, and fine tuning. Yet our problems are not short-term. My biggest criticism of the Opposition when they make proposals like this is that they are again suggesting that we have short-term problems which can be tackled by cutting a percentage point or two off here or there. In giving the impression that as a result unemployment will be cut very dramatically, they are misleading the people about whom they undoubtedly care, and about whom we care. They are raising their hopes.
I do not think that the present unemployment situation is short-term, that its causes are short-term or that its solutions are short-term. My diagnosis of the cause

is a complete failure of investment of the quantity needed by industry over the six years when hon. Gentlemen opposite were in power, when companies were squeezed and cash was not available, and the capital market was shot to pieces. To suggest that with a little bit of fine tuning of the economy people who are out of work will automatically be brought back into flow, unit costs will fall, and the whole thing will come right, is misleading. We have long-term problems, and we have set out to tackle them on that basis in a way which will provide sound future long-term employment for many of the people who unfortunately are now out of work. Labour hon. Members are just raising hopes and misleading people about the true causes of the present situation when they suggest that the answer is a percentage point or two here or there of purchase tax.
We have identified the cause as something quite different and much more significant—wage and cost inflation. I agree wholeheartedly with my right hon. Friend the Secretary of State for Employment, who said that to add demand pull to cost push would be a real recipe for disaster. Yet this again is what Labour hon. Members are suggesting.

Mr. John Horam: I am always charmed by the speeches of the hon. Member for Enfield, West (Mr. Parkinson), who seems to speak either preceeding or following me. He usually begins by making a disarming disclaimer that he has risen to his feet only because he cannot resist the fascinating smile of the Whip. He has not done that this time, and I give him credit for that.
The hon. Gentleman usually goes on to say that almost by chance he happens to be an accountant in a particular field. On a previous occasion he mentioned an interest in the building industry. This time he mentioned an equally far-reaching field, namely, the food industry. It so happens that as an accountant in the food industry he understands its particular problems and gives specific examples of why the Government's case stands up. He always presents his case against this background of factual grasp and hard understanding of the market, but usually his points add up to something of a rather marginal kind. Sometimes I feel that he is nibbling at one corner of the total area and not looking at the entire picture.
Unfortunately in what he has said today he has gone rather below his usual level of fairness in calling the new Clause a panic measure. It will be accepted by all members of the Committee that the Opposition have consistently put forward this point of view, and since—

Mr. Parkinson: The operative word is "since" and I look forward to hearing the next sentence, because one of the things right hon. and hon. Members opposite did not say when they were in government was anything about cuts in purchase tax.

Mr. Eric S. Heffer: The hon. Gentleman was not here and he would not know what some of us said.

Mr. Parkinson: I can read.

Mr. Horam: If I may intervene in my own speech, we have consistently put forward the point of view ever since the election that we were looking for a high rate of growth and have consistently advocated measures to do that. We have always said, as has my right hon. Friend the Member for Stechford, that what we objected to as much as to anything else was the timing of the Government's measures. We believe that something should have been done to attack the situation which we are now facing. Hon. Members on both sides would agree that that was said and that that was right. This new Clause carries forward that point of view.
My right hon. Friend in moving the Clause said that it would have an effect far more immediately than the S.E.T. reductions, which are rather an alternative chosen by the Government out of the political promises made at the General Election. But what has been the situation since the Government came into power? They came into power with one enormous problem, which was that of inflation, and they had a considerable opportunity. That opportunity was created for them by the former Government who left a healthy balance of payments situation. It created a situation in which a Government could not afford to think about the matter completely exclusively. There was the opportunity to go forward at a faster rate.
How have the Government reacted to this situation? They have tried to tackle

the problem of inflation by reducing the rate of growth. They have done exactly what the old adage tells us—they have thrown out the baby with the bath water. Indeed, the present Government have gone even further. They have thrown out the baby but retained the bath water in the sense that they have certainly reduced the rate of growth. Equally, they have not solved the problem of inflation, or even reduced it.
I notice that the Chancellor of the Exchequer has been making some claims to bolster morale after last week's round of by-elections, and they will no doubt be hit over the head once again next week. A headline in this morning's Financial Times said:
Barber shows signs of progress in the fight against inflation.
I take it that is a reference to the Chancellor of the Exchequer. He quotes the Chancellor of the Exchequer as saying, in a speech last Wednesday evening:
… some grounds for hope that we are at last beginning to get on top of the problem of inflation. The most recent provisional figures show that, whereas average earnings in January were more than 14 per cent. higher than a year earlier, in February they were less than 13 per cent. higher and in March less than 11 per cent. higher than a year before.
It is not for me to comment on the way the Financial Times handles its major news story, but, curiously enough, the next paragraph but one says:
It is believed that Whitehall officials are reluctant to draw any firm conclusions from the March earnings figures …
which the Chancellor has just quoted as showing that there may have been progress towards solving the problem of inflation—
… which are considered to be something of a freak. A more reliable indicator is the three-month moving average of earnings, which shows an annual rise of 12 to 12½ per cent.
So even within the one news story any good tidings we have had from the Chancellor of the Exchequer are contradicted. There is nothing to show that we are winning the battle of inflation.
I am not wholly without sympathy for the predicament of the Government. As a new Member of the House since 18th June last year, I appreciate the problems of coming into a new situation. It takes time to find one's feet, unexpected things happen and, since it takes time to understand the full situation, one is slower to


move. Equally, the Government came in with certain problems about taxation to which they felt they must give priority. Whatever the motives, there was a fatal lack of attention to the old problem of reconciling growth and inflation and trying to get a higher rate of growth with a lower rate of inflation. Although the Government have had 10 months to achieve something positive, even now they have not got the situation right. They will not get it right until they try more direct methods. I think it was Lord Keynes who said that one should never trust a man who says he will do something by an indirect method. One should always go for the direct method.
We should return to the simple philosophy of tackling inflation by means of a kind of prices and incomes policy, coupled with other measures to make it possible to sell such a policy—

Mr. Parkinson: What kind of policy?

Mr. Horam: I should be happy to explain it, but in the middle of a debate on a new Clause on purchase tax we do not want to embark on a separate debate about a prices and incomes policy; it would be out of order.
If we tackle inflation directly by a prices and incomes policy, and tackle the balance of payments problem by changing the exchange rates, that leaves the central area freer to go for growth. This is what the Government should do. The new Clause is symbolic of the desire of the Opposition to go for growth and to use the methods which we set in train when we were in power—a prices and incomes policy and devaluing the pound. That is the simple logic, and until the Government grasp that logic they will not make much progress. If the Government do not use the Regulator, if they do not adopt the new Clause, if they make no change of any kind, what will be the situation when we are debating the Finance Bill next year? There will probably be faster growth; we may have climbed to 3 per cent. a year; but what is 3 per cent. a year when everybody else is getting 4 per cent., 4½ per cent. or 5 per cent. a year?

Mr. Parkinson: It will be faster than the Labour Government achieved.

Mr. Horam: It may be faster than it is at the moment, but it is not as fast as

that achieved by everybody else. It still has not got beyond the point at which we have been chugging along for so many years. We still do not have the advance for which we have been looking. We are still fundamentally in the same wood.
9.30 p.m.
Equally, what will happen to unemployment figures in a year's time? if we are lucky we may not reach a figure of one million unemployed. I suspect that is part of the small parcel of goodies in the Budget. But will we still be talking about 850,000 unemployed, 900,000 unemployed or 950,000 unemployed? The unemployment figure could well be something of that kind, even if it does not reach one million—which is quite on the cards.
What will be the position about inflation a year from now? Will it be down to 4 per cent., say, the German rate? It will probably be around 7 or 8 per cent. Even if it is as low as 6 per cent., will that be any advantage over 8 per cent.? What is the use of a policy which causes the rate to descend from, say, 8¾ per cent. at present down to 7½ per cent. next year, 7 per cent. the year after, and 6 per cent. the year after that? Is that the kind of progress which was envisaged in that famous phrase "at a stroke"? By that time a General Election will be near for the Government and they will have to do some praying as well as policy making to get out of that difficulty. Any progress towards getting rid of the problem of inflation will have to be quicker than that if we are to call it a significant advance.
The Government are caught in their own sterile method of trying to solve the problem of inflation by acting on the growth rate. The new Clause is symbolic of the Opposition's approach, which is wholly different and would be as wholly successful.

Mr. Higgins: We have had a very broad-ranging debate covering everything from the most profound issues of economic policy to a very considerable number of constituency points. I will endeavour to answer the various points made.
When I looked at the Amendment on the Notice Paper in the name of the official Opposition, I confess that I was


a little surprised by it. It seemed that J. B. Priestley had intended to write one of his time plays on an "I have been here before" basis, and had ended up writing "Alice Through the Looking Glass" instead, because we seem to have a complete reversal of what the Labour Party did when in Government, especially about purchase tax. If I may remind the House of what the Labour Administration did and relate it to the Amendment, it will be rather illuminating.
In October, 1964, there were three rates of purchase tax: 10 per cent., 15 per cent. and 25 per cent. In July, 1966, the Labour Government used the regulator, upwards, and the rates became, effectively, 11 per cent., 16½ per cent. and 27½ per cent. In the April, 1967, Budget, the regulator increases were consolidated. Then, in the March, 1968, Budget the 11 per cent. rate was increased to 12½ per cent., the 16½ per cent. rate was increased to 20 per cent., and the products liable at 27½ per cent. were divided between two new rates, 33⅓ per cent. and 50 per cent. Purchase tax at 33⅓ per cent. was extended to a number of other items, and at 50 per cent. to other items yet again.
The hon. and learned Member for Lincoln (Mr. Taverne) may catch your eye shortly, Miss Quennell. I have good reason to remember the debate on Clause 5 of the Finance Bill, 1968. It started at 5.40 p.m. on 8th May and ended at something after 5.40 a.m. the following day.
Throughout the period of the Labour Government, the rates of purchase tax were increased and increased and increased. But this is not the end of the story, because, in November, 1968, the regulator was again imposed and the rates became, effectively, 13¾ per cent., 22 per cent., 36⅔ per cent. and 55 per cent., and in the 1969 Budget, the regulator increases were consolidated and extended at 13¾ per cent. to household textiles and 22 per cent, to pet foods.
It is a little extraordinary that they should have put down an Amendment to reduce the rates of purchase tax when on almost every conceivable occasion when they could have done so when in government the Labour Party increased the rates of purchase tax.

Sir G. Nabarro: Would my hon. Friend confirm the salient point that when the Tories went out in 1964 the yield from purchase tax was approximately £600 million and when the Labour crowd went out in 1970 it was £1,260 million—more than double?

Mr. Higgins: I do not have the precise figures in front of me, but I know that my hon. Friend has often quoted them and I do not doubt that the general trend is of the kind that he describes. But it is not surprising that we find this kind of proposal, because it is by now well established that Labour Governments increase purchase tax and other taxes and Conservative Governments try to reduce them.
But I must ask my right hon. and hon. Friends to join me in opposing the new Clause. My right hon. Friend has made massive tax reductions since we were elected and we do not feel that there is scope for further reductions at this moment. The reasons for this were debated at length on 11th May in the debate on the regulator, when we put forward our views clearly. My right hon. Friend, in columns 290 to 293, gave our reasons for believing that the Budget judgment had been right and remained right and that it was not correct to alter it. That being so, it necessarily follows, because the sums involved are not small, that I cannot give a favourable reply to the various points made.
The right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) overestimated the effect of the Amendment on prices and under-estimated its effect on revenue. We feel that it would probably cost £280 million in a full year, not the £207 million which the right hon. Gentleman mentioned. This would be nearly the same as the 1971–72 cost of the Budget reductions in S.E.T. and about £35 million higher than the full year cost of that reduction. So there is a substantial difference here.

Mr. Roy Jenkins: I gave one estimate of the cost at £315 million, according to what assumption one made about demand elasticities. I do not know what the hon. Gentleman is assuming there.

Mr. Higgins: The right hon. Gentleman gave one estimate, and I think he was right in saying £315 million on the


assumption of no change in demand. He then gave a figure of £207 million with some estimate of demand. Our view of what would actually happen is £280 million, so there is a substantial difference. But, of course, there is no great precision in these matters and they are not easy to estimate.
Similarly, the proposal of my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) would cost nearly £70 million in a full year, which again is a substantial sum. Given our view that we do not think it is prudent to increase demand for the reasons that have been given, we do not feel able to accept any of the proposals.
Having said that, I must answer a number of specific points that were made. The hon. Member for West Lothian (Mr. Dalyell) referred to school books. He was a member of a deputation which I was glad to receive, though I was sorry to hear him say that he felt that the deputation was not satisfactory. I was not at that stage able to give any undertaking.
The discussion which took place was on the question of educational equipment generally, and the position relating to school books is not just a question of whether one should make a reduction because it is difficult to distinguish exercise books from other items which might be used for non-educational purposes.
The hon. Gentleman seemed to be referring to printed books, which puzzled me because I am advised that there is no purchase tax on printed books. The hon. Gentleman was, therefore, on a bad point. However, if there is something about which he wants to write to me I shall be glad to look into the matter.
In a moving speech, the hon. Member for St. Helens (Mr. Spriggs) spoke of pet food, and my hon. Friend the Member for Worcestershire, South also raised this point. I assure the Committee that before the Budget we looked at this question in great detail. Perhaps without presumption I can tell the hon. Member for St. Helens that the case he presented, in correspondence and again tonight, while we are unable to accept it, was extremely cogently presented. His constituents have every reason to feel that their views have been represented clearly and distinctly.

To meet his request would cost in the region of £15 million, a substantial sum, and we are not, therefore, able to meet the point he raised.
My hon. Friend the Member for Worcestershire, South asked a number of questions, particularly about the motor industry—or what he prefers to call the industry producing vehicles. The questions which arise in this context are extremely complex and the sums involved are very large. The revenue from purchase tax on motor vehicles is about £257 million. I have taken careful note of the points my hon. Friend made, and I am sure that my right hon. Friends who are concerned with other aspects of the motor industry will have done the same. We feel, however, that we cannot accept his proposal.
My hon. Friend went on to raise the question of toothpaste and called in aid the experience of Olympic athletes. He spoke of a 1969 document which stated that they did not pay much attention to their teeth. My hon. Friend may care to know that before the 1952 Olympics my dentist positively insisted that he should extract one of my wisdom teeth. Whether that had any effect on my performance in the 1952 Olympics I have no idea. I assure him that I am mindful of the point he raised.

Sir G. Nabarro: Would my hon. Friend be more expansive on this matter? It is a very narrow point but it has great psychological value. It is important economically as well as in saving dental charges. How much would it cost to get rid of purchase tax on toothpaste? I do not expect him to answer off the cuff, but I would appreciate an answer before the end of the debate, even if it means the P.P.S. scurrying to the official box in the corner of the Chamber.

Mr. Higgins: I can save anyone the need to scurry because I had anticipated that my hon. Friend would ask that question. I made inquiries—

Sir G. Nabarro: Very good.

Mr. Higgins: —alas, however, without success. Toothpaste falls within a broad category of items including cosmetics. The total revenue from that group, I am advised, comes to about £68 million. I


am sorry to tell my hon. Friend that precisely what percentage comes from toothpaste it is not possible to ascertain, since the information is not available.

9.45 p.m.

Sir G. Nabarro: This has been an aggravated grievance over many years. Will my hon. Friend please undertake before Report to find out from the manufacturers, because I am informed that they have got figures. Then I will proceed, in solicitous fashion, with a further Amendment unilaterally to relieve dentifrice.

Mr. Higgins: I will do my best to meet the point. If my hon. Friend puts down a Question, I will try to answer it, but I cannot guarantee to do so. It may be that, for one reason or another, it will not be possible. But perhaps he will put down a Question.

Sir G. Nabarro: I want an Amendment on Report.

Mr. Higgins: An Amendment on Report is another matter, and no doubt if my hon. Friend wishes to put one down, he will do so.
I turn now to the broader issues raised by the right hon. Member for Birmingham, Stechford on new Clause 4. He was particularly anxious to argue, and largely rested his case on the argument, that it would have been better to have reduced purchase tax than selective employment tax. Before the Budget, we examined carefully all the possible alternatives but concluded that the right course of action was to reduce selective employment tax by 50 per cent. The right hon. Gentleman made some important points on the question of timing and we listened to what he said with great care. One can never tell in advance how these matters are going to work out as far as macro-economics is concerned. But if there was any occasion when there was clearly a mistake in Government timing, it was in the procrastination of the Labour Government after devaluation in 1967, when they failed to reinforce devaluation with fiscal measures on an appropriate scale. I regard that as one of the major errors of judgment of the last Government and one of the original causes of the immediate problems with which we are confronted.
Purchase tax is paid quarterly in arrears and, therefore, if a cut is made at the beginning of the financial year, the effect on the yield is only about 75 per cent. over the full year. Given the concentration of the right hon. Gentleman on timing—and I make this point to the hon. and learned Member for Lincoln as well—new Clause 4 is framed in rather a strange way because it would not come into effect until the Bill had received the Royal Assent, whereas it would have been possible to frame it in a different way, as the hon. and learned Gentleman will recall from Amendments we discussed upstairs in Standing Committee in 1968.
I think the Committee will agree that the argument that we should cut purchase tax rather than selective employment tax is very much out of touch with the general feeling in the country. I believe that on this issue the Opposition are out of touch with public opinion. In modern times no tax has aroused, justifiably, such widespread dislike in the minds of the general public as S.E.T. has done, and the substantial cut we propose to make in it will do much to convince the taxpayers that the Government mean business in their desire to reduce taxation and reform our tax system. We promised that we would do this in our Election Manifesto, and S.E.T. will end in 1973. We believe in keeping our promises, and for that reason I believe that the initial cut in S.E.T. is one that we are right to have made.
I will not labour the point which I made in the Budget debate about Lord Diamond, who was Chief Secretary to the Treasury throughout the period of office of the Labour Government. I recalled that he said that he thought selective employment tax would eventually become accepted. It is right to stress that the effect of cutting S.E.T. as against the effect of cutting purchase tax has a number of repercussions which reflect the arguments which we consistently advanced against S.E.T. when we were in Opposition.
First, as regards exports, S.E.T. is paid by many firms involved in the export of both goods and services. In Opposition we repeatedly moved Amendments to exclude export firms from the tax for that reason. S.E.T. has tended as a tax to reduce the level of exports and


inhibit them. The 50 per cent. reduction will help in this respect.
Second, the cut in S.E.T. will halve the effect of the many anomalies which the tax produces and which lead to trade distortion. There is an extensive range of wholesalers and service engineers who find that their activities are taxed while those of their competitors escape the tax because their activities extend into manufacturing also.
We believe that these effects are important. If we were to cut purchase tax instead we would not have this benefit.
The third point which is worth making is as regards the effect on prices. Purchase tax applies over a certain range of consumer items and to cut purchase tax would affect only those articles, not labour costs generally as the cut in S.E.T. will. A cut in purchase tax would have little or no effect on the prices of most food stuffs or on construction, other than the one referred to in the speech of the hon. Member for St. Helens.
In contrast, the cut in S.E.T. will have an effect in reducing the costs of the distribution of food. We have already seen this effect, as has been frequently pointed out, in the more competitively minded sections of the retail trade. Even before the cut in the tax actually becomes effective it has had an effect on the level of prices.
I see that the hon. Member for Liverpool, Walton (Mr. Heffer) has left his seat, though he has been here for much of the debate. As regards the effect of S.E.T. on the construction industry, here again a stimulus is badly needed, and a reduction in an important element of labour costs in the construction industry will help to give that stimulus and will be of direct assistance to people who want to buy houses. It will also have the effect of reducing labour-only sub-contracting, which has always been a point made by the hon. Member for Walton. Again, if we were to reduce purchase tax these benefits would be thrown away. Therefore, we think it is right to have given priority to cutting S.E.T. rather than to cutting purchase tax.
S.E.T. is very odd indeed, because it is a normal feature of the tax system that the taxpayer bears much of the cost of collecting revenue. S.E.T. is very odd in that it is borne by employers who are

meant to be outside the scope of the tax and who for administrative reasons are subject to a forced loan. The hon. Member for West Lothian referred to this. The cut in S.E.T. will have an effect in increasing company liquidity and reducing the size of that forced loan.
In our view the Government, although they regret that it will take three months from the date of the announcement before employers begin to feel the benefit of the cut, have no doubt that it is the right cut to make in the present circumstances and that we are right to have given it priority.

Mr. Dalyell: On the question of timing, when do the Government think the companies will be helped with their liquidity problems as a result of the changes in S.E.T.? What is the timing of this? It certainly has not been fully felt yet. What is the estimate?

Mr. Higgins: This is something which comes into effect as the tax is cut. There is a slight bulge initially because employers will be getting refunds at 100 per cent. and paying the tax at only 50 per cent. The pattern is not very clear. If I understand the situation correctly, it is loaded at the beginning of the period, for the reason I have just mentioned.
The right hon. Gentleman also referred to the question of fairness, and said that it would be fairer to cut purchase tax rather than S.E.T. I leave on one side what the effect must have been when time after time he increased purchase tax. Be that as it may, the fact is that cutting S.E.T. has a considerable effect on charities. This is not unimportant, because charities are subject to the forced loan effect of S.E.T. When we opposed the original intention of imposing S.E.T. on charities at the time of its introduction, the Government eventually gave way, but they did not give way on the forced loan point. I understand that about 19,500 charities are registered for refund, although they are not all currently active, and that in the financial year 1970–71 they will be repaid about £30 million. So the cut in S.E.T. will have a favourable effect on those charities, and perhaps, when one considers the broad question of fairness, this is a matter which is not totally irrelevant. Nor is the fact that the cut in S.E.T. will


help nursing homes and relieve the pressure on the National Health Service, and so on.
This question of fairness should be looked at as a whole. That being so, I doubt the validity, tenuously based statistically, of the right hon. Gentleman's remarks.
If we look at the Clause as a whole, I think it is right that we should reject it and pursue the course that my right hon. Friend put forward in his Budget speech. I should perhaps remind the Committee that we shall soon be abolishing both S.E.T. and purchase tax and replacing them with value-added tax.
I listened to the speech of my hon. Friend the Member for Worcestershire, South with an air of impending nostalgia. In advocating a V.A.T., he is to some extent putting himself out of a job. No one has been stronger in attacking the anomalies of purchase tax. But the course that we are pursuing is the right one, and we are glad to have my hon. Friend's support in this matter.
It is not only S.E.T. which is a bad tax. Purchase tax is bad as well. It distorts the pattern of consumer preference and results in some very difficult and arbitrary decisions having to be made between one commodity and another.

Mr. Spriggs: Will the hon. Gentleman undertake that when a V.A.T. replaces purchase tax the Government will not put the V.A.T. on pet foods and human foods?

Mr. Higgins: My right hon. Friend has been asked questions on this point on a number of occasions, and the position has been made quite clear. We should propose to give relief for food, except perhaps in the case of those items now bearing purchase tax. But we shall bear in mind the representations which have been made to us.
There will be a great many technical changes involved in this transition. We hope that trade associations envisaging problems or difficulties will make their views known to Customs and Excise—and the sooner, the better—as part of their comments on the Green Paper on the V.A.T. So far not many trade associations have taken this opportunity. If right hon. and hon. Members on all sides feel that there is an industry which has

problems of a technical nature on which they wish to make representations, I hope they will get in touch with Customs and Excise and make sure that their views are known so that they can be taken into account when we come to form a better tax.

Mr. John Roper: Will the hon. Gentleman respond to the request which, I understand, the C.B.I. has made, that a further three months be given to trade associations to make representations on this very complicated matter?

Mr. Higgins: That is not necessary. It is open, and has been since the Budget, for trade associations and others to make representations. We believe that the time available is adequate. It is easier for us to take the representations fully into account if they are made as soon as possible, but we believe that the overall period is sufficient.
For the reasons which I have set out, I ask my right hon. and hon. Friends to join me in voting against the inclusion of the Clause in the Bill. The course which the Government have set out in the Budget is right. Therefore, it would be wrong to accept the Clause.

[Sir ROBERT GRANT-FERRIS in the Chair]

10.0 p.m.

Mr. Taverne: The Minister of State started by making a point which was not worthy of him. He drew attention to the complete reversal of attitudes towards purchase tax which he claimed was shown in the new Clause. The hon. Gentleman realises that there is nothing in this point. It is a totally different position where one has a balance of payments deficit and has to achieve a shift of resources to exports from that where one has a large balance of payments surplus and must act urgently to deal with record unemployment.
Three main themes have run through the debate. The first concerned the effect of purchase tax compared with selective employment tax on prices. There can be no doubt that the effect of a cut in purchase tax would have a greater effect on prices than a cut in S.E.T.

Sir G. Nabarro: There is a great deal of doubt about that.

Mr. Taverne: The hon. Member for Worcestershire, South (Sir G. Nabarro) mentioned a number of things, to which I shall return, at least with one of which I agreed. But let me quote the Government's figures which perhaps the hon. Gentleman has not noticed.
On 7th July, 1970, the Financial Secretary was asked what was the effect on the Retail Price Index of S.E.T. The hon. Gentleman said:
it is estimated that S.E.T. represents about 1 per cent. on the retail price index."—[OFFICIAL REPORT, 7th July, 1970; Vol. 803, c. 468.]
Therefore, one would think that a halving of S.E.T. would have an effect on the retail price index of about one-half per cent. This contrasts with the effect on the retail price index of a cut in purchase tax which we are proposing of about 1·2 per cent. That has not been challenged, and it can be substantiated. Clearly, on the Government's figure, there is a far greater effect on prices, which is of enormous significance if one directs the cut on purchase tax and not on S.E.T.
All that the Minister of State came back to was the general attitude of public opinion. It was perhaps a somewhat unfortunate time to choose when we have just had some expression of public opinion in the course of the last week. But a simple dogmatic assertion of demerits based on the supposed reactions of public opinion is no substitute for analysis and argument.
The second theme running through the debate has concerned fairness. In effect, the Minister said, "Of course, there are more unsatisfactory features of S.E.T.; it has an effect on exports and on charities". But he did not deny that the redistributive effect of a cut in S.E.T. is less favourable to the lower income groups than the effect of a cut in purchase tax.
Perhaps I might divert and refer to exports. The sphere in which it has had an effect on exports, if any, concerns earners of invisible exports. Yet this is the sphere where exports are most healthy and have been advancing best. So it, cannot be said to be a millstone round the necks of our exporters when the one area in which it operates is that where we show a successful record.
On progressiveness and regressiveness, both the Minister of State—

Sir G. Nabarro: The hon. and learned Gentleman refers to exporters, but invisible exporters benefit enormously from a, cut of 50 per cent. in selective employment tax. It is a substantial reduction in their weekly wage bill, and they are all grateful for it.

Mr. Taverne: I think that the hon. Gentleman will find that the proportion of S.E.T. to the total on-cost of labour in invisible exporting is very small. The proof of the pudding is in the eating, in the enormous achievements which have in no way been hampered by the effect of S.E.T.
I return to the question of the redistributive effect. Both the hon. Member for Worcestershire, South and the Minister of State referred to the comparative advantages of value-added tax and the disadvantages of purchase tax. The hon. Member for Worcestershire, South made one of his rumbustious and rollicking speeches on the anomalies of purchase tax. It was enormously enjoyable. But the very reason why purchase tax is mildly progressive compared with the regressive effect of value-added tax is the existence of bands. Their existence creates anomalies, but if we are to make it less regressive and more progressive there must be bands.
Even if there is an exemption of food from value-added tax, that will not greatly affect its regressive effect. The more exemptions there are, the more administratively expensive it becomes, and to some extent anomalies will re-emerge. The only study of the effect of value-added tax of which I am aware, based on an analysis of the family expenditure survey, shows that there is no much regressive effect through the workings of the value-added tax if food is exempted than if it is not. However one approaches value-added tax—if one replaces S.E.T. and purchase tax by it, one will strike a considerable blow against the lower income groups.
The third theme running through the debate has been the effect of timing on growth. If there is a way in which out new Clause could be given immediate effect, and the Government said that they would put the matter fight if we would withdraw it, we should be happy to do so. But it is not a matter of drafting to which the Minister of State has objected.


On this part of the theme I find myself very much in agreement with what was said by the hon. Member for Bedfordshire, South (Mr. Madel) and some of what was said by the hon. Member for Worcestershire, South. There is a tremendous need to stimulate demand. For that purpose, the Clause can be considered separately from the objective of S.E.T.
The hon. Member for Worcestershire, South talked about the need to bring down costs in the motor industry. He said that it was operating at only 85 per sent. of capacity and that a boost to demand would bring down costs. That is precisely the argument which we on this side have been putting to the Government and which the hon. Gentleman's Front Bench has turned its back on. It is true that stagnation adds to inflation, because it increases unit costs. The only answer given is that we must not add demand inflation to cost inflation.
But I must tell the hon. Member for Enfield, West (Mr. Parkinson) that we do not have our present unemployment for an unexplained reason. It is because demand is insufficient; there is not sufficient aggregate demand. With so much slack in the economy, to stimulate demand

and bring down unit costs will not add demand inflation, because we are nowhere near the limits of our capacity. It is no answer for the Government to say, "We cannot stimulate any more demand because otherwise we make the inflationary position worse."

On the issue of timing, the Minister of State gave no answer to my right hon. Friend. I have no doubt that in the position in which we find ourselves at the moment, with unemployment rising—and with the seasonally adjusted figures still rising—the Chancellor will have to act on demand by using, among other things, the regulator. He will have to act in July or in the autumn. For every month he delays, he is keeping tens of thousands of people out of their jobs for so many more months, and he will create further unemployment. Therefore, it is totally unjustified to postpone action. In its effect on growth and timing, the new Clause is wholly justified, and I appeal to my right hon. and hon. Friends to support us in the Lobby.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 100, Noes 139.

Division No. 370.]
AYES
[10.12 p.m.


Albu, Austen
Janner, Greville
Price, William (Rugby)


Allen, Scholefield
Jenkins, Hugh (Putney)
Rees, Merlyn (Leeds, S)


Archer, Peter (Rowley Regis)
Jenkins, Rt. Hn. Roy (Stechford)
Robertson, John (Paisley)


Armstrong, Ernest
Johnson, James (K'ston-on-Hull, W.)
Roderick, Caerwyn E.(Br'c'n &amp; R'dnor)


Barnett, Joel
Jones, Dan (Burnley)
Rodgers, William (Stockton-on-Tees)


Blenkinsop, Arthur
Judd, Frank
Roper, John


Callaghan, Rt. Hn. James
Kaufman, Gerald
Ross, Rt. Hn. William (Kilmarnock)


Carmichael, Neil
Kelley, Ri[...]chard
Sheldon, Robert (Ashton-under-Lyne)


Carter-Jones, Lewis (Eccles)
Latham, Arthur
Shore, Rt. Hn. Peter (Stepney)


Cocks, Michael (Bristol, S.)
Lawson, George
Short, Rt. Hn. Edward(N'c'tle-u-Tyne)


Crossman, Rt. Hn. Richard
Lee, Rt. Hn. Frederick
Silkin, Hn. S. C. (Dulwich)


Cunningham, G. (Islington, S. W.)
Leonard, Dick
Sillars, James


Dalyell, Tam
Lever, Rt. Hn. Harold
Skinner, Dennis


Davidson, Arthur
Lewis, Ron (Carlisle)
Spearing, Nigel


Davies, Denzil (Llanelly)
Lomas, Kenneth
Spriggs, Leslie


Davis, Clinton (Hackney, C.)
Mabon, Dr. J. Dickson
Stallard, A. W.


Deakins, Eric
McElhone, Frank
Stewart, Rt. Hn. Michael (Fulham)


de Freitas, Rt. Hn. Sir Geoffrey
Mackenzie, Gregor
Stoddart, David (Swindon)


Douglas, Dick (Stirlingshire, S.)
Mackie, John
Stonehouse, Rt. Hn. John


Dunnett, Jack
McNamara, J. Kevin
Strang, Gavin


Eadie, Alex
Mallalieu, E. L. (Brigg)
Summerskill, Hn. Dr. Shirley


Fisher, Mrs. Doris (B'ham, Ladywood)
Marquand, David
Taverne, Dick


Fitch, Alan (Wigan)
Mayhew, Christopher
Thomas, Jeffrey (Abertillery)




Torney, Tom


Fletcher, Raymond (Ilkestone)
Meacher, Michael
Urwin, T. W.


Fraser, John (Norwood)
Millan, Bruce
Weitzman, David


Gilbert, Dr. John
Morgan, Elystan (Cardiganshire)
Wellbeloved James


Golding, John
Orbach, Maurice
Wells William (Walsall, N.)


Gordon Walker, Rt. Hn. P. C.
Oswald, Thomas
White, James (Glasgow, Pollok)


Grant, John D. (Islington, E.)
Paget, R. T.
Whitlock, William


Hamilton, William (Fife W.)
Parker, John (Dagenham)
Wilson, Rt. Hn. Harold (Huyton)


Hart, Rt. Hn. Judith
Pavitt, Laurie



Heffer, Eric S.
Perry, Ernest G.
TELLERS FOR THE AYES:


Horam, John
Prentice, Rt. Hn. Reg.
Mr. Kenneth Marks and


Houghton, Rt. Hn. Douglas
Prescott, John
Mr. William Hamling.


Hunter, Adam






NOES


Adley, Robert
Gorst, John
Morrison, Charles (Devizes)


Atkins, Humphrey
Gower, Raymond
Nabarro, Sir Gerald


Baker, Kenneth (St. Marylebone)
Grant, Anthony (Harrow, C.)
Neave, Airey


Baker, W. H. K. (Banff)
Gray, Hamish
Normanton, Tom


Barber, Rt. Hn. Anthony
Green, Alan
Nott, John


Bell, Ronald
Grieve, Percy
Oppenheim, Mrs. Sally


Benyon, W.
Grylls, Michael
Owen, Idris (Stockport, N.)


Biffen, John
Gummer, Selwyn
Page, Graham (Crosby)


Blaker, Peter
Gurden, Harold
Parkinson, Cecil (Enfield, W.)


Boardman, Tom (Leicester, S. W.)
Hall, John (Wycombe)
Percival, Ian


Body, Richard
Hastings, Stephen
Powell, Rt. Hn. J. Enoch


Boscawen, Robert
Hawkins, Paul
Pym, Rt. Hn. Francis


Bossom, Sir Clive
Hay, John
Raison, Timothy


Bowden, Andrew
Higgins, Terence L.
Redmond, Robert


Bray, Ronald
Hiley, Joseph
Reed, Laurance (Bolton, E.)


Bruce-Gardyne, J.
Hill, James (Southampton, Test)
Rees, Peter (Dover)


Buck, Antony
Holland, Philip
Rippon, Rt. Hn. Geoffrey


Butler, Adam (Bosworth)
Hordern, Peter
Russell, Sir Ronald


Carlisle, Mark
Hornsby-Smith, Rt. Hn. Dame Patricia
Scott-Hopkins, James


Chichester-Clark, R.
Hunt, John
Shelton, William (Clapham)


Churchill, W. S.
Hutchison, Michael Clark
Sinclair, Sir George


Clark William (Surrey, E.)
Iremonger, T. L.
Soref, Harold


Clegg, Walter
James, David
Speed, Keith


Coombs, Derek
Jenkin, Patrick (Woodford)
Spence, John


Cooper, A. E.
Kershaw, Anthony
Stainton, Keith


Cormack, Patrick
Kilfedder, James
Stewart-Smith, D. G. (Belper)


Costain, A. P.
King, Tom (Bridgwater)
Stodart, Anthony (Edinburgh, W.)


Crowder, F. P.
Kinsey, J. R.
Stuttaford, Dr. Tom


Curran, Charles
Knight, Mrs. Jill
Sutcliffe, John




Taylor, Frank (Moss Side)


d'Avigdor-Goldsmid, Maj.-Gen. James
Knox, David
Taylor, Robert (Croydon, N. W.)


Dean, Paul
Le Marchant, Spencer
Tebbit Norman


Deedes, Rt. Hn. W. F,
Lewis, Kenneth (Rutland)
Temple, John M.


Digby, Simon Wingfield
Longden, Gilbert
Tugendhat, Christopher


Dixon, Piers
McCrindle, R. A.
Turton, Rt. Hn. R. H.


Dykes, Hugh
Maclean, Sir Fitzroy
van Straubenzee, W. R.


Elliot, Capt, Walter (Carshalton)
McMaster, Stanley
Vaughan, Dr. Gerard


Elliott, R. W. (N'c'tle-upon-Tyne, N.)
McNair-Wilson, Michael
Vickers, Dame Joan


Eyre, Reginald
McNair-Wilson, Patrick (NewForest)
Waddington, David


Fenner, Mrs. Peggy
Mather, Carol
Ward, Dame Irene


Finsberg, Geoffrey (Hampstead)
Maude, Angus
Warren, Kenneth


Fisher, Nigel (Surbiton)
Maudling, Rt. Hn. Reginald
White, Roger (Gravesend)


Fietcher-Cooke, Charles
Meyer, Sir Anthony
Wilkinson, John


Fookes, Miss Janet
Miscampbell, Norman
Woodhouse, Hn. Christopher


Fortescue, Tim
Moate, Roger



Fox, Marcus
Money, Ernie
TELLERS FOR THE NOES:


Fry, Peter
Monro, Hector
Mr. Hugh Rossi and


Goodhart, Philip
Montgomery, Fergus
Mr. Bernard Weatherill.


Goodhew, Victor




Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

Bill (Clauses 6 to 8, 10, 22, 30 and 49) reported, without Amendment; to lie upon the Table.

Orders of the Day — LAND REGISTRATION AND LAND CHARGES BILL [Lords]

Order for Second Reading read.

Motion made, and. Question put forthwith pursuant to Standing Order No. 66, That the Bill be now read a Second time.

Question agreed to.

Bill accordingly read a Second time.

Orders of the Day — LAND REGISTRATION AND LAND CHARGES [MONEY]

Queen's Recommendation having been signified

Resolved,
That, for the purposes of any Act of the present Session to amend the Land Registration Acts, 1925 to 1966 and the Land Charges Act, 1925 and related enactments, it is expedient to authorize—

(a) the payment out of moneys provided by Parliament of any increase in the expenses of the Chief Land Registrar which is attributable to any provision of the said Act of the present Session;
(b) any payment into the Consolidated Fund.—[Mr. Patrick Jenkin.]

Orders of the Day — CRIMINAL DAMAGE BILL [Lords]

Order for Second Reading read.

Motion made, and Question put forthwith pursuant to Standing Order No. 66, That the Bill be now read a Second time.

Question agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

Orders of the Day — QUEEN ALEXANDRA'S ROYAL NAVAL NURSING SERVICE

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Rossi.]

10.20 p.m.

Dame Joan Vickers: I am glad that we are able to have this debate at such an early hour. I thank my hon. Friend the Under-Secretary not only for replying to the debate but for the considerable interest which he has taken in the Royal Naval Hospital at Stonehouse, Plymouth. He will be pleased to know that excellent progress is being made with the proposed plastic surgical unit and if all goes as planned, this should be finished by April, 1972.
For some considerable time there has been concern about what might be termed misemployment of nurses. In the future, I should like to see the nurses giving their full time to nursing or training for nursing. In June, 1970, the right hon. Member for Coventry, East (Mr. Crossman) wrote to the National Health Service boards of governors of hospitals and management committees and stressed the fact that nurses should not be asked to do housekeeping duties. This matter was then raised also with the Ministry of Defence in July, 1970, having previously been raised in March, 1969, and February, 1970.
As my hon. Friend will know, there is a serious shortage of nursing officers and naval nurses and this has been a matter of concern to Her Majesty's Services for some years. I understand that successive matrons-in-chief have tried to get the system changed; in other words, they have tried to get specially qualified people to do the job of housekeeper. For example, one superintending sister full-time, one sister part-time and three head naval nurses full-time are at present employed to administer the sisters' and nurses' quarters and messes. Two superintending sisters, two head naval nurses and two assistant nurses are allowed, by complement, to do these duties. These are to look after the main messes, which are the sisters' mess and the main nurses' mess. There are three separate houses in

the Royal Naval Hospital, and, outside the hospital, there are the Nelson Gardens sisters' quarters and Wingfield Mansions nurses' quarters.
Naturally, most of these women are not trained for housekeeping work and it is a great waste of both their training and talent to do anything other than nursing. Nursing is a definite vocation. It appeals only to a certain number of women.
With intensive care units in this hospital and with modern surgery, all their skill is needed for nursing. Surgeons may undertake an operation with great skill, but it is usually the nursing care that pulls a very ill patient through. It is tiring and exacting work it needs their full attention, courage and patience.
In May, 1970, the then Minister of Health wrote to all the boards of the National Health Service and asked them to see that the nurses' working conditions were likely to encourage them to stay in the Hospital Service. This criterion should apply also to Service hospitals. Nurses should not have to spend valuable time on chores to be done by other people less qualified, so I am asking the Minister to look into the matter to see whether he can recruit civilians qualified in housekeeping as is done in hostels, some nurses' homes and most civilian hospitals.
There are plenty of these people who would be willing to undertake this type of work and they would relieve the highly skilled and excellent nursing staff to do the job for which they are trained. I am asking for permission for the hospitals to engage two resident housekeepers and three full-time assistant housekeepers. This could lead to a reduction of one superintending sister and three head naval nurses or assistant head naval nurses. This would add no extra expense, therefore, to the upkeep of the hospital and the nurses, in my opinion and theirs, would be much better employed doing work for which they spent years of training. With civilian housekeepers, even this side might be better done because they might be better trained for that type of work.

10.26 p.m.

The Under-Secretary of State for Defence for the Royal Navy (Mr. Peter Kirk): My hon. Friend the Member for


Plymouth, Devonport (Dame Joan Vickers) has raised a point which has been giving my Department some concern for some time. It concerns the welfare of Queen Alexandra's Royal Naval Nursing Service, an order who perform their duties so well that they hardly ever attract the attention of the House. So I am very glad that my hon. Friend has raised this matter, because it enables me to say something about them and about the need to provide them with the very best supporting service possible.
They are of course peculiar to the Royal Navy. They were started by Royal Charter in 1902 by Queen Alexandra herself and they have gone from strength to strength ever since. They are a vital part of the support facilities of the Royal Navy, and we could not carry on without them. Therefore, anything which affects them is bound to be of considerable concern to the Navy and therefore to me.
My hon. Friend raised this matter some time ago with my predecessor and the whole thing has been under consideration for some months. I am glad to have this first opportunity to tell the House what we are doing about the management of the quarters both for officers and for ratings in the Q.A.R.N.N.S. in the various naval hospitals, including the one at Plymouth. This problem does not apply only to Plymouth but to other hospitals as well.
At present the quarters are managed or supervised by members of the Q.A.R.N.N.S. who run the civilian domestic staff and those who originally entered as V.A.D.s have made a particularly helpful contribution in this respect. The V.A.D.s were introduced during the last war largely to take on anything broadly in the nursing field, including the secretarial and housekeeping work. Recruitment to the V.A.D.s stopped in 1960, and the remaining members of the force who applied to the Royal Navy were then absorbed in the Q.A.R.N.N.S.
Their numbers have naturally dwindled and at the moment there are only 11 left. These also in due course will retire. We had to consider what alternative arrangements we could make. We could continue to fill the posts in the nurses' quarters with members of the Q.A.R.N.N.S., including the ex-V.A.D.s

so long as they remained in the Service, but my hon. Friend has pointed out the disadvantages in this course—that once the V.A.D.s had been phased out, one was misemploying trained nurses. Clearly there would be attractions in the long term in making some other arrangement. The "housekeeper" rôle is not popular with fully-trained nurses, as my hon. Friend pointed out, and in view of national shortages, they would be better employed on nursing duties.
Several alternatives are open to us. We might set up a non-nursing branch of the Q.A.R.N.N.S.; the use of W.R.N.S. personnel could be considered; or we might even employ civilian housekeepers or wardens, which, as my hon. Friend said, is now common in National Health Service hospitals. All these possibilities have been looked at carefully and all have advantages and disadvantages.
We hope to take a decision in principle very soon as to whether a new scheme should be introduced, and if so, what form it should take. I am sorry to tell my hon. Friend that I cannot say any more tonight, except to point out that the job goes rather wider than the purely catering and housekeeping arrangements. Ideally, we are looking for, though we may not be able to find, somebody who, in addition to catering and housekeeping, can do general administration, welfare and regulating duties and all the things that apply more to a uniformed service than to civilian hospitals.
It is also a job in which, ideally, the staff should be mobile and ready to fit in with Service requirements. We cannot contemplate a situation in which they would settle down in one hospital, unable to be moved elsewhere. There are, therefore, strong arguments for continuing to provide uniformed staff as opposed to civilians, but there are other factors which will have to be taken into account.
The best I can do tonight is to promise my hon. Friend that she will be informed as soon as a decision in principle has been taken. If the decision is to set up a non-nursing branch of the Q.A.R.N.N.S. its terms of service will probably be similar to the existing conditions in the Q.A.R.N.N.S., but this would have to be worked out in detail once a decision in principle had been taken.
We should naturally be looking for girls or women with some aptitude and


experience for the job, and preferably with some formal qualifications, but this may not be absolutely necessary. I cannot tell my hon. Friend more at this stage. This is a problem and I agree that it has been dragging on for a long time. We want to bring it to a con-

elusion, and I again assure my hon. Friend that I will let her know as soon as a decision has been taken.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes to Eleven o'clock.